ICICI bonds prices up post Fed cut

Singapore, Sep 27 | Updated: Sep 28 2007, 05:51am hrs
ICICI Bank Ltd, India's biggest lender to consumers, had its bonds rise after a debt sale on Wednesday boosted funding by $2 billion, indicating that investor risk appetite may have returned to Asian credit markets.

The yield on the bank's 6.625% bonds due October 2012 fell by 16.15 basis points to 6.4835% in Singapore, according to Merrill Lynch & Co. The price increased by 0.622 cents to 100.598 on Thursday, Merrill Lynch said. ICICI joined other investment-grade and high-yield borrowers in selling dollar-denominated bonds after the US Federal Reserve cut the benchmark rate for overnight borrowing by half a percentage point to 4.75% on September 18. The rate reduction bolstered investor confidence that stability might return to credit markets roiled by losses in securities linked to US subprime mortgage loans. The 6.625% of five-year notes were issued at a discount of 99.916 cents on the dollar to yield 237.5 basis points more than US Treasuries of similar maturity, according to data compiled by Bloomberg. A basis point is 0.01percentage point.

The Mumbai-based bank has been raising funds to meet growing credit demand in the world's fastest-growing major economy after China. India's central bank estimates the $875 billion economy will grow 8.5% in the year to March 31.

ICICI raised $5 billion in June in India's biggest share sale and got a $ 1.5 billion loan, a record by an Indian bank, this month. It has sold $4 billion of bonds since January, the most in a year since Bloomberg startedcollecting data in 1999. ICICI Bank Ltd said its year-old private-banking unit in Dubai has attracted at least $300 million of money from the Persian Gulf to India, the world's second -fastest growing major economy. The investments were in 10 private equity deals and privately placed share sales in India's infrastructure, real estate and corporate sectors, Chetan Mehra, regional head of private banking at India's second-biggest bank by assets, said in an interview.

Gulf-based businesgroups, private equity companies and sovereign-wealth funds participated in the deals, which had an "average size of about $30 million," Mehra said.