New Delhi : The finance ministry is in talks with public-sector banks to encourage them to increase their participation in the bond market, an official said on Friday.
Economic Affairs Secretary Subhash Chandra Garg held an internal meeting with the officials of the budget division and the department of financial services on rising bond yields.
The official said the ministry is in the process of firming up steps to revive demand in the bond market.
He said tweaking within the borrowing calendar is a possibility wherein the weekly bond auctions may see more longer-tenure securities rather than shorter tenure securities. There is talk that there could be more issuances of floating rate bonds, he said.
The yields on government bonds have climbed 140 bps since August because of lack of demand from PSBs, and rising odds of an increase in domestic interest rates. The 10-year benchmark government bond yield closed at a three-year high of 7.90 per cent on Thursday. According to the official, RBI was not part of the discussions on bond yields on Friday but will be apprised of the deliberations at the meeting.
Out of the seven auctions of bonds held by the government in the current financial year, four have been partially devolved on primary dealers.
This is mainly because state-owned banks, the biggest holders of government securities, have been looking to lighten their bond portfolios after racking up enormous marked-to-market losses on their holdings.