The government cancelled Rs 12,000 crore bond auctions on Monday, lowering its market borrowing programme for the current financial year in its bid to rein in deficit at 5.3 percent.
This move will lead to rally in the bond market on Wednesday and the bond yield may fall from 7.83 percent to 7.80 percent in early trade, Agam Gupta, Standard Chartered Bank said in an interview to CNBC-TV18.
"Given this move, I think there is a chance that the government may manage to show a better fiscal deficit number than 5.3 percent," he added.
Below is the edited transcript of Agam Gupta’s interview with CNBC-TV18.
Q: What do you expect the prices will go to or the yields will fall tomorrow when the market opens- if it opens?
A: Because the government has cancelled its last scheduled auction we will definitely rally tomorrow. The yield closed at 7.83 percent yesterday and we should hit 7.80 percent in early trade, which was the last significant level seen this year.
Q: How would you read this- the government canceling the current bond auction sighting that they have current enough cash and liquidity into the fiscal deficit number which could get announced in the Budget – do you think there is a possibility of it being lower than 5.3 percent?
A: Yes. Borrowing has taken in the form of 5.3 percent number, so there is basically a chance that they manage to show a better number than 5.3 percent. Having said that, there will be other nuts and bolts which will go towards the fiscal deficit. So, just cancellation of auction will not really determine the fiscal deficit number, but there is a chance that they show it lower than 5.3 percent.