IRFC raised Rs 3,000 crore via 15-year bonds at 6.73% on Thursday.
Two public sector units, Indian Railway Finance Corporation (IRFC) and BPCL, cumulatively raised Rs 5,000 crore from the corporate bond market on Thursday, according to information provided by dealers. While bond yields have been coming down in recent times, sufficient liquidity in the system and incremental participation by investors have helped bring down spreads in recent times.
IRFC raised Rs 3,000 crore via 15-year bonds at 6.73% on Thursday. The firm had paid 6.90% for a similar tenor bond in early June, according to Bloomberg data. IRFC’s bonds have also seen a compression in spreads in recent times, having narrowed by about 13 basis points compared to early June. BPCL also raised close to Rs 2,000 crore from the corporate bond market through 5-year paper on Thursday.
Dealers say that good quality PSU names are attracting the most interest from investors, albeit, the overall volumes of bond issuances have slowed down compared to April and May when the TLTRO funds were being deployed.
Ajay Manglunia, MD and head of institutional fixed income at JM Financial, said there has been some rally in high-rated PSU corporate bonds in recent times. “Buying has emerged in good quality bonds due to sufficient liquidity in the system and lack of any major credit offtake. Bonds of PFC and REC have seen their yields fall by 50-60 basis points. Also, issuances have been slowing down a bit after the surge in volumes in April and May. With this slowdown in issuances and demand coming back, we are seeing some compression in spreads. Buying has been seen from mutual funds, insurance players, corporates, EPFO, retirement trust etc. as well as those who have returned to the market after a gap of 2-3 months,” Manglunia said.
Indeed, the months of April and May saw significant volumes this year to the tune of Rs 1.39 lakh crore compared to Rs 1.13 lakh crore in the same period last year. Private placement of corporate bonds between March and May this year stood at Rs 2.14 lakh crore, having fallen by just over 6% compared to the same period last year.
Lakshmi Iyer, chief investment officer-debt at Kotak AMC, said there is a reasonably good appetite in the market for good quality names “and that is why we are seeing some of these papers being issued at relatively better yields”.
“Mutual funds are receiving good flows in some of the funds that hold corporate bonds like PSU funds. Moreover, long term government bonds have been outperforming till a few months back and the quality bonds are just about catching up supported by good demand,” Iyer said.