Riding on the strong demand for Indian paper overseas, Axis Bank raised $500 million through dollar-denominated senior unsecured notes at a yield of 3.25%, the lowest for any Indian lender.
The bank gained an edge in pricing partly due to a fall in the five-year US treasury note yield which has fallen 28 bps over the last two months.
The yield on the five-year US note was around 1.83% on September 18 when ICICI Bank issued bonds and at 1.59% on April 10, the date of SBI bond issue. The treasury yield has since then fallen to 1.55% at the time of the Axis Bank bond issue pricing.
However, the spread over US treasury yield demanded by investors has also shrunk, indicating a growing demand for Indian paper. ICICI Bank, had raised $500 million through bonds in September and had to pay a spread of 180 bps over US treasury yield.
“If ICICI Bank or SBI were to offer bonds today, the pricing would be similar or even tighter than Axis Bank as the US yields have fallen,” said a banker. SBI bonds (in April) were priced at 240 bps above US treasury yield.
Axis Bank issue, jointly arranged by Barclays, Credit Agricole, HSBC, JP Morgan and Standard Chartered Bank issue, hit a total subscription of $2.2 billion.
“The proceeds will be used for our overseas branch funding,” said Sidharth Rath, President of treasury, business banking & capital markets at the bank.
Around 10% of the issue were taken by long-term sovereign wealth funds.
Axis Bank was last in the offshore bond markets in August 2012 when it raised $250 million priced at 390 bps over US treasury yield.