The top issuer in August was Housing Development and Finance Corporation (HDFC), which raised R2,450 crore. In July, the top issuer was Power Finance Corporation, which raised R4,335 crore. Infrastructure bonds issued by banks were a big contributor in August.
Among the buyers are foreign funds. Ajay Manglunia, senior vice-president and head of fixed income at Edelweiss Financial Services, said there was interest from foreign institutional investors as the FII limit for government securities was getting exhausted. Meanwhile, mutual funds continue to buy paper with tenures of up to five years and longer-term paper is being picked up by life insurance companies, employee provident funds and pension funds.
NS Venkatesh, executive director and head of treasury at IDBI Bank, said spreads on corporate bonds, which have not tightened, should stay range-bound for the next 2-3 months. Currently, AAA-rated 10-year paper from corporates like Rural Electrification Corp and Power Finance Corp have spreads of about 60-70 bps over the benchmark government security yield.
However, Arvind Konar, head of fixed income at Almondz Global Securities, said yields in the near term of 2-3 months might come off if inflation comes down. The 10-year G-sec yield could end at 8.40%, he added.
ICICI Bank, the country's largest private sector bank, last month issued 10-year infrastructure bonds worth R2,000 crore and, earlier in July, looked to raise seven-year infrastructure worth R500 crore with a green-shoe option of R500 crore. Kotak Mahindra Bank, too, raised R300 crore through infra bonds in August.
Public sector lender Andhra Bank raised R1,000 crore through seven-year paper and the issue was rated AAA by Crisil.