India to conduct debt switch in market, likely soon-officials

Last Updated: Mon, Dec 09, 2013 09:19 hrs

India's planned 500 billion rupee ($8.2 billion) debt switch programme will be done through the bond market and not through the central bank, two officials with direct knowledge of the country's plans said on Monday.

Longer-dated government bond yields have been rising in recent days partly due to worries the debt switch programme, first unveiled in the 2013/14 budget earlier this year, may be implemented soon.

Under the planned debt switch, the government will buy short dated debt maturing in fiscal years 2014/15, 2015/16 and 2016/17 and in turn sell longer-dated bonds to markets. The central bank will not be buying or selling debt to the government directly, these officials said.

This transaction, planned as cash neutral, will be done to reduce the redemption pressure on the government's coffers.

"The debt switchover has been planned for the second half of the current fiscal year and would surely go through market and not the RBI," said the official, who declined to be named because of the sensitivity of the issue.

As to timing, one of the officials said the debt switch will happen "very soon," while another said it will be done at "an appropriate time" in the second half of the fiscal year ending March, depending on market conditions.

The new benchmark 10-year bond gave up all of its early gains and was trading up at 8.87 percent on Monday.

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