India to begin borrowing talks this week as traders seek more ultra-long bonds

India will initiate discussions with bankers and investors this week to finalize the government's borrowing plan for the second half of the financial year, according to four treasury officials. The bond traders are anticipated to request an increased supply of ultra-long-term debt, sources revealed on Tuesday. The government had initially set a record gross borrowing target of 17.20 trillion rupees for the financial year, as outlined in the February 1 budget.

However, they subsequently reduced the target to 16.09 trillion rupees following bond switches. The government intends to raise 7.89 trillion rupees ($83.11 billion) through bonds from October to March, accounting for around 49% of the annual target, following the issuance of 8.20 trillion rupees in April-September. It is anticipated that the demand will largely be for longer-dated bonds due to the robust investor appetite, noted a trader from a primary dealership.

All treasury officials declined to speak to the media, citing their lack of authorization. Ultra-long bonds, which have maturities ranging from 30 to 50 years, made up 24.9% of April-September borrowing, down from 35% the previous year. This decline has contributed to a decrease in their yields by approximately 20 basis points so far this financial year, as opposed to an 8 basis point decline in the benchmark 10-year yield.

In recent weeks, there has been a rise in demand from long-term investors such as insurance companies and pension funds, as their investment corpus continues to expand, according to traders. Srinivas Rao Ravuri, Chief Investment Officer at Bajaj Life Insurance, commented that the insurance industry is seeing significant growth, driven by regulatory support, digital innovation, and heightened customer awareness.