Bond markets await the announcement of the Reserve Bank of India's annual dividend payout to the government, which is estimated around Rs 33,000-35,000 crore.
Investors had initially worried the dividend payout would have eased liquidity, raising concerns that the central bank would have to resort to new measures to drain cash such as with a sale of government bills.
However, those worries have eased. Instead, traders say liquidity conditions could tighten again despite the dividend payout on speculation that the government has breached its short-term borrowing limit of Rs 30,000 crore from the RBI.
Should the government have breached the limit, it would constrain its spending, removing a source of liquidity from markets.
Copyright: Thomson Reuters 2013
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