The State Bank of India may look at raising funds through an overseas bonds sale programme in the next quarter, if market conditions turn favourable and spreads narrow, an official said.
The bank, which has so far raised around $2.9 billion through medium-term notes (MTN), prefers the spreads to come down to 175-185 basis points (bps) over the mid-swap rate from the current level of around 200-210 bps.
An MTN programme allows an issuer to raise funds on an ongoing basis through various products such as floating rate notes or fixed rate bonds. Mid-swap rate is the equivalent of the Libor for longer maturity bonds. Spread is the mark-up or premium above the mid-swap rate and is variable according to market condition.
At the current rate, SBI will have to pay a coupon rate of around 4.45-4.55%. The coupon rate for the bond issue is calculated on the basis of the prevailing spreads above the five-year mid-swap rate.
?We would be comfortable to raise money at a spread of 175-185 basis points. This would be possible only when the market turns normal over the next three months,? a State Bank official, who did not wish to be identified, said.
Last October, SBI had mopped up $750 million (about Rs 3,600 crore) through its MTN issue, which carried a maturity of five years and a coupon rate of 4.5%.
?Looking at the things where they are, we do not have any urgent need to launch the next tranche of the MTN issue at least in the immediate future as the market is expected to remain volatile,? the official said.