Axis Bank's Neelkanth Mishra: Budget's Financing Strategy Pushing Bond Yields Higher

• Neelkanth Mishra, Chief Economist at Axis Bank, states the Union Budget's financing strategy is unintentionally pressuring the bond market, despite fiscal caution.
• He notes that 10-year bond yields have risen to 6.76%, contrary to expectations for a fiscally disciplined budget.
• Mishra attributes this to conservative government assumptions on growth, revenues, and lower-than-expected inflows from small savings schemes, leading to higher gross borrowing.
• The economist highlights the irony that a well-designed, predictable budget is causing bond market instability due to operational issues.
• Mishra warns that elevated bond yields could delay economic recovery and impact monetary policy, suggesting a joint resolution by the government and RBI is needed.

Why It Matters: Budget's conservative financing assumptions and high borrowing are unexpectedly driving bond yields up, risking economic recovery.