On Thursday, a senior government official stated that the Indian government anticipates a decline in the cost of borrowing through treasury bills in the future. This follows the recent dip in the 10-year benchmark bond yield below 7 percent for the first time in over a year, which reached a low of 6.97 percent earlier in the day due to a combination of cooling inflation and expectations of a U.S. Federal Reserve pivot.

The official believes that the 10-year yield will continue to trade below 7 percent. While government bond yields have decreased significantly in recent days, T-bill yields have remained relatively stable after an initial drop following the Reserve Bank of India's unexpected pause. The official reports that the 91-day to 364-day T-bills yields have remained in the range of 6.90-7.00 percent for the past two weeks. Additionally, the government aims to achieve its fiscal deficit target for 2022/23 of 6.4 percent by utilizing better-than-expected tax revenues and implementing spending cuts. Despite a shortfall in the small savings fund, the government will manage to meet the revenue and spending gap.

The official also notes that for the upcoming green bond offering, the government aims to receive a better 'greenium,' which refers to the green premium investors are willing to pay for the bond's sustainable impact. In its first issue, the government received 5-6 basis points of greenium, which decreased to 3-4 basis points in the next auction.