Economic Survey 2023: G-sec trading volume zooms to two-year high in second quarter of FY23

The Economic Survey 2023, tabled in the Parliament on January 31, said the trading volume of government securities (G-Sec), including treasury bills and state development loans, touched a two-year high during the second quarter of the current financial year.

“The trading volume in G-Secs (including T-Bills and SDLs) reached a two-year high of Rs 27.7 lakh crore during Q2 FY23, registering a year-on-year growth of 6.3 per cent,” the Survey document said.

The survey attributed the jump to higher investor participation in the bond market. As per market participants, the rising interest is among institutional investors and there is very minimal retail participation.

The yield on 10-year benchmark government bond largely remained stable and is currently trading at 7.3727 percent.

Money market dealers attributed it to the short-covering by traders. The 10-year benchmark G-sec is trading at 7.3727 percent.

The government bond has risen in 2022 in line with the rate hike by the Reserve Bank of India's (RBI) rate hike and on global cues, after remaining steady thorughout 2020 and 2021.

The weighted average yield spike reflects the domestic bond market volatility stemming from uncertainty in crude prices, a hawkish stance of major central banks, a hardening of global bond yield and the pressure on the rupee.

The monthly average yield on the 10-year government bond stood at 7.3 per cent in December 2022 after having peaked at 7.5 percent in June 2022.

Yields moderated in November and December 2022 following smaller rate hikes by major central banks and declining inflation. With the softening of yields, volatility also declined in the second half of 2022.

According to survey document, private Sector Banks emerged as the aggressive trading segment in the secondary market during the Q2FY23, with a share of 25.0 per cent in “Buy” deals and 24.8 per cent
in “Sell” deals in the total outright trading activity.

This was followed by foreign banks, public sector banks, primary dealers and mutual fund.

On a net basis, foreign banks and primary dealers were net sellers. In contrast, public sector banks, cooperative banks, financial institutions, insurance companies, mutual funds, private sector banks and ‘others’ were net buyers in the secondary market.