Bond yields set to harden on higher govt borrowing plan

10-year benchmark G-Sec is likely to touch 8.50% by end of the month,” IDBI Bank treasury head, N S Venkatesh, said.

With the higher government borrowing plan announced in the Budget, bond yields are likely to harden in the near future, say traders and analysts.

The 10-year benchmark G-Sec yield is expected to be around 8.5% by the month end.

“There is a little bit of pressure on the bond market due to additional borrowing plan of the government. 10-year benchmark G-Sec is likely to touch 8.50% by end of the month,” IDBI Bank treasury head, N S Venkatesh, said.

He, however, said liquidity easing measures by the central bank, such as open market operations, and a possible policy rate cut are likely to ease pressure on yields.

As per the Budget, government would go for gross market borrowings of Rs5.7 trillion of which market borrowings are slated to be Rs4.79 trillion.

“The market was expecting a gross market borrowing of around Rs 5.4 trillion, which has been exceeded by around Rs40,000 crore. So, this will put some pressure on the market,” Venkatesh said.

Some other analysts also said that higher supply of government bonds would see hardening of yields in the first quarter of the next fiscal.

"With majority of redemptions in FY13 slated for the first half, the government would have to front-load the borrowing calendar. This would mean borrowing of Rs15,000-16,000 crore every week. We expect the yield curve to come under pressure and steepen as we head into next year," Canara Robeco Mutual Fund investment head, Ritesh Jain, said.

He also said that 10-year G-Sec will trade between 8.40% and 8.50% in the near future and then inch up to 8.60%-8.75% in the next quarter.

SBI Mutual Fund chief investment officer Navneet Munot said the Budget has delivered a net borrowing number which is bigger than most market estimates. “Bond markets are likely to treat the budget numbers negatively in the short-run,” he said.

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Pension reforms to be long-term saving, security: Survey

"Pension reform is important. It will not only facilitate the long-term savings for development but also help establish credible and sustainable social security system in the country," the survey said.

Pension reforms will lead to long term savings and will also create a sustainable social security system, the Economic Survey 2011-12 said.

"Pension reform is important. It will not only facilitate the long-term savings for development but also help establish credible and sustainable social security system in the country," the survey said.
 
Last year, the Economic Survey 2010-11 had also advocated reforms in the pension sector and said, "There is a need to consider passage of the long pending Pension Fund Regulatory and Development Authority (PFRDA) Bill in order to give a fillip to regulatory robustness in the pension sector."

The Pension Fund Regulatory Development Authority (PFRDA), set up as a regulatory body for pension sector, is yet to get statutory powers as the Bill for the purpose is still pending in Parliament.

The Parliamentary Standing Committee on Finance has given its recommendations on the bill and the draft legislation has also got the Cabinet nod. It could be taken up for debate during the ongoing Budget session.

Earlier the Bill for the pension reforms lapsed in the Parliament with the expiry of last Lok Sabha in 2009. Interim PFRDA is functioning since 2003 through an executive order.

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Tata Motors hikes passenger vehicle prices by up to Rs35,000

Finance Minister Pranab Mukherjee had proposed to raise excise duty to 12% from 10%.

Auto major Tata Motors said it has increased prices of its passenger vehicles, including the Nano, by up to Rs35,000 with immediate effect due to hike in excise duty in the Budget for 2012-13.
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"We have raised the prices as per the excise duty hike in the Budget. In passenger cars, the increase will vary between Rs2,000 and Rs8,000 depending upon various models," a Tata Motors spokesperson told PTI.

Under the passenger car division, the company sells small car Nano, hatchback Indica series and Indigo family of sedans. The company, however, did not specify the model-wise break up of the price increase.

In case of utility vehicles like Safari, Aria and Sumo, the hike will be from Rs8,000 to Rs35,000, he said.

"Regarding the commercial vehicles, we have decided to pass on the additional burden of 2% to consumers. We have a wide range of products in this category," the spokesperson said.

Finance Minister Pranab Mukherjee had proposed to raise excise duty to 12% from 10%.

The excise duties for petrol cars with engines under 1,200 cc and diesel cars with engine capacity under 1,500 cc, but the length exceeding four metres have been increased to 24% from the previous 22% with a fixed duty of Rs15,000.

Petrol and diesel driven vehicles having length exceeding four metres and engine capacity of over 1,200 cc and 1,500 cc respectively will now be charged with an ad valorem duty of 27%, instead of the earlier 22% with a fixed duty of Rs15,000.

Besides, basic customs duty was also hiked to 75% from 60% for fully imported vehicles priced over USD 40,000 and with engine capacity of over 3,000 cc and 2,500 cc for petrol and diesel driven vehicles respectively.

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