Power Finance Corporation (PFC) and Small Industries Development Bank of India (SIDBI) on Tuesday scrapped bond issuances worth Rs 11,500 crore due to hardening of yields. This is despite the 25-bps rate cut announced by the Reserve Bank of India on December 5 policy review.
PFC planned to raise Rs 3,500 crore through 15-years bonds. If it would have raised the amount, the cut-off yield would have come at 7.17%, against the expectation of 7.10%. It is the second time that PFC scrapped an issuance. On November 25, it withdrew around Rs 3,000-crore bond issuance, citing higher cut-offs.
SIDBI’s fundraising plans
SIDBI was planning to raise Rs 8,000 crore through bonds maturing in three-year and four-months. The cut-off came at 6.86%, while issuer was looking for 6.75% level.
Issuers had waited or scrapped issuances earlier expecting yields to soften following the monetary policy. On the contrary, they hardened due to expectation of no immediate rate cuts.
Dealers express limited confidence
The yield on 10-year benchmark government bond rose 10 basis points since the policy. “There is no confidence in the market right now. Market participants are uncertain on whether yields will come down or not. Some believe that we have reached the end-of-the-rate-cut cycle,” said a fixed income dealer at a state-owned bank.