Trading volumes in government securities (g-secs) hit a two-year high of ₹27.67 lakh crore in the July to September quarter (Q2 of 2022-23), rising 8.64% from Q1, with the Finance Ministry terming this a sign of growing market interest in such bonds.
“The higher trading volume in Q2 of 2022-23 in comparison to previous quarter shows the growing interest of market players/ traders in government security market,” the Budget Division of the Department of Economic Affairs in the Finance Ministry emphasised in the Public Debt Management report for July to September 2022 released on Monday.
The share of Central government securities’ in traded volumes jumped to 82% in Q2 from 76% in Q1, while transactions in State bonds dipped from 8% in Q1 to just 5% between July and September, marking their lowest share in at least five quarters.
Amounting to little more than ₹22.67 lakh crore, Central government securities transactions were close to levels last seen in the period from July to September 2020. In terms of ownership, Government of India bonds owned by the RBI fell to a two-year low of 15.3% in Q2. This was also the first time in seven quarters that RBI-owned bonds have slipped below 16% of outstanding dated GoI securities.
The weighted average yield on new Central government securities hardened to 7.33% in Q2 from 7.23% in the April to June quarter, with the Finance Ministry attributing this uptick to ‘the volatility in the domestic bond market stemming from volatility in crude prices, hawkish stance from major central banks and hardening global bond yields’.