State-owned IDBI bank has postponed 10-year infrastructure bond issue through which it was planning to raise R1,000 crore, said a bank official, adding the bank may tap the bond markets in April if the pricing is attractive.
“We expect the yields on infrastructure bonds to fall further compared with the current levels. If the benchmark yield is around 7.50% in April, we think we will be in a fairly comfortable position to issue bonds” said NS Venkatesh, chief financial officer at IDBI Bank.
The bank had issued infrastructure bonds worth R3,000 crore in January at a coupon rate of 8.725%. In September 2014, it had issued infra bonds worth R1,000 crore at a coupon rate of 9.27%.
After the consumer price inflation for February was reported at 5.37% — 26 bps higher than the January figure — the 10-year benchmark yield, which is used as a proxy for pricing public sector unit (PSU) bonds, had risen by 8 bps. Market experts believe yields are likely to remain at the current levels until clarity emerges on various issues like the outcome of the US Fed meet.
“The market is not expecting a rate cut in the near future. Moreover, investors are eagerly awaiting the outcome of Federal Open Market Committee (FOMC) meet on March 18 which will decide the future course of the US interest rates,” said Lakshmi Iyer, chief investment officer at Kotak AMC.
A huge supply of bond issuances has also led to a demand for higher yields by investors who are evaluating the best options available. National Cooperative Development Corporation (NCDC), Damodar Valley Corporation (DVC), Power Finance Corporation (PFC), Nuclear Power Corporation of India (NPCIL) and Indian Railway Finance Corporation (IRFC) are some of the public sector units likely to raise funds through the bond market, according to sources.
Recently, IRFC had stopped bidding for its bond issue due to demand for higher rates. IRFC, which was looking to raise R3,000 crore, was aiming a rate of sub-8.27% level where as the minimum bid stood at 8.38%, said sources. The company may attempt to tap the bond markets again before the fiscal year comes to an end, said an IRFC source.