The RBI intends to switch ₹ 1.19 trillion worth bonds.

Markets are holding all of their gains at one point four percent, with the nifty at 17350, a gain of 250 points, and the sensex up close to 800 points. However, today and tomorrow are all about macroeconomics, so let's begin with an important development that is taking place.

The RBI has announced that it will swap 1.19 lakh crore of short-term bonds it holds for longer-term bonds maturing in five to seven years. This announcement has caused a quick drop in bond deals because markets may borrow less next year.

This is an important announcement, but first the details. As you may know, the reserve bank exchanges some of the government's near-term bonds for longer-term bonds on a regular basis. Now, what it has switched is that 1.1 nearly 1.2 trillion rupees worth of bonds that were in 22 23 and 24 are being extinguished, and in exchange, the rbi is taking from the government longer-term bonds that, if they had not been extinguished, the government would have to repay

Now they don't have to repay it in five years or seven years, so next year's borrowing requirement comes down, which has elated the bond markets.

When we polled economists up until yesterday, the expectation was that the government would put a market borrowing number of close to 13 lakh crore in the budget tomorrow, with about four lakh crore being used to repay bonds maturing in fi 23.

Because of the rbi's switch, approximately 64000 crore less bonds will mature in fi 23. As a result, economists are calling in and changing the poll numbers to more like 12 and a half lakh row or 12 and a half trillion of overall market borrowing that the government may announce in the budget tomorrow. Figures vary widely; some expect 12 or even less than 12 trillion rupees, while others expect 13 and a half trillion rupees.