Rural Electrification Corporation (REC) is set to raise Rs 2,750 crore through its five-year bond issue, according to bond market sources.
“The coupon rate on the bond issue is 8.36%,” a source indicated. Corporate bond yields haven’t moved much compared to the previous month. Bloomberg data show the state-owned company had issued five-year bonds in mid-August at 8.37%.
The next main trigger for the markets would be the central bank decision on rates at its September 29 credit policy.
“RBI’s tone will also be equally important in determining how the corporate bond yields would pan out going forward,” a bond market participant said.
Sources said that Power Finance Corporation (PFC) and National Bank for Agriculture and Rural Development (Nabard) are also likely to approach the bond market soon.
Since the US Federal Reserve did not hike rates in its September policy, yields are expected to stay benign for some time, especially considering the fact that a supportive inflation data is believed to have created more room for the RBI to cut rates.
“As of now, there are some companies enquiring about the rates in the bond markets. But many are still holding back expecting a rate cut in the RBI policy,” a bond arranger said. Corporate bond issuances have seen a huge rise since the beginning of this fiscal with companies mopping up R2.16 lakh crore between April and September 2015. This is about 150% higher than what was raised in the same period last year.
This increase could be attributed to a mass shift of borrowers to the corporate bond market due to softer yields compared to bank base rates.