1. Corporate bond yields rise as no immediate rate action seen

Corporate bond yields rise as no immediate rate action seen

Meanwhile, the Indian Railway Finance Corporation (IRFC) priced its 10-year bonds at 7.33% to raise Rs 1,745 crore, sources told FE.

By: | Mumbai | Updated: August 24, 2017 5:01 AM

Corporate bond yields have risen over the previous few weeks as is evident from the pricing seen on some of the deals on Wednesday. Two sources indicated that the National Highways Authority of India (NHAI) is believed to have issued bonds worth Rs 5,000 crore via private placement. “NHAI is believed to have privately placed its 15-year bonds at 7.38% with the EPFO,” said a source aware of the deal. The NHAI could not be contacted for further information. Bloomberg data show that the company had issued 30-year bonds at 7.14% to raise Rs 3,500 crore in July this year. Notes had call options at the end of 10 years and 30 years, Bloomberg data indicated. The market is closely watching the yields even as the consumer price index (CPI) inflation has come in at 2.36% in July, compared with 1.54% in June. If the CPI remains sticky or increases in coming months, there will be limited room for the central bank to consider any further rate cuts.

Meanwhile, the Indian Railway Finance Corporation (IRFC) priced its 10-year bonds at 7.33% to raise Rs 1,745 crore, sources told FE. Last week, dealers indicated that IRFC had scrapped its bond issue due to high yield demand. It was looking to raise funds via 15-year bonds for which it received the lowest bid or L1 at 7.43%. Earlier in June, IRFC had issued 10-year bonds at 7.27% to raise Rs 2,050 crore, Bloomberg data show.

Lakshmi Iyer, chief investment officer – fixed income and head of products at Kotak AMC, points out that there are too many factors weighing on the market as of now. “The G-Sec market has been lacklustre with yields rising in recent times. On one side, we saw a neutral stance by the RBI along with the expected 25 basis points rate cut while (on the other) we also saw the CPI rising in July. The timing of future rate action also seems uncertain,” Iyer said. Bond market sources pointed out that Oriental Bank of Commerce (OBC) withdrew its additional tier-1 bond issue on Wednesday after it received bids above 11%. “It received one bid worth Rs 100 crore at 11.4%, another worth Rs 100 crore at 11.75% and one more worth Rs 100 crore at 12.5%. Apart from this, there was a bid of Rs 5 crore as well,” said a dealer. OBC was looking to raise close to Rs 1,000 crore via AT-1 bonds.

REC on Wednesday priced its three-year and one-month bonds at 6.87% to raise close to Rs 2,485 crore, according to dealers. The 10-year benchmark yield closed at 6.54% on Wednesday, indicating an 8 bps rise since the announcement of the monetary policy on August 2.

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