Govt Bond Yield Dips To Two-Year Low: Know Bond Market Outlook

Bond Market OutlookDue to changes brought by the recent budget, investors may face a 10 per cent TDS deduction when investing in G-Secs and SDLs after October 1, 2024. This could lead to increased interest in other tax-efficient listed instruments.Further, according to a Money control report, the government is considering discontinuing the issuance of Sovereign Gold Bonds (SGB) due to cost concerns. This is amidst it cutting customs duties on gold and silver in the Budget, which is expected to reduce demand for SGBs.On the recent budget Murthy Nagarajan, Head-Fixed Income, Tata Asset Management said, “The fiscal stance of the 2024-25 budget aims to provide a positive stimulus to economic growth and build resilience to global challenges. As per the medium Term Fiscal consolidated road map, the net debt of the central government is expected to be 57 per cent of GDP. The government is targeting a fiscal deficit of 4.5 per cent or lower in the next financial year. The government is not giving further roadmap, due to global uncertainty and wants to retain the fiscal flexibility to respond to these events.””This is a long-term positive as capital expenditure has been retained at Rs 11.11 lakh and revenue expenditure has been marginally increased. We may have a pleasant surprise, with borrowing lower than what is targeted. The ten-year yields may trade in the band of 6.90 to 7 per cent in the coming months.”

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