Issuances of foreign currency bonds by companies in 2015 may cross the current year’s total issuance of $18 billion, says bond market experts. The demand for Indian paper overseas may remain buoyant.
Manmohan Singh, MD and head of debt capital markets of India and South East Asia at RBS, believes foreign investors are likely to prefer Indian paper over other EM securities on account of positive economic data. “It (issuances) may even rise to over $20 billion next year,” said Singh. A strong and stable government at the Centre will only to add to the positive sentiment.
On other hand, interest rates in advanced economies are expected to stay benign in 2015, making it easier for companies to access cheaper fund overseas. “We believe benign interest rate environment to remain till H1 2015. The current negative interest rate regime by ECB will add to the issuance volumes across the globe,” said Singh.
In 2014, credit default spreads (CDS) or the price-to-purchase protection against the credit risk of the Indian corporate bonds narrowed by 100 bps, making it easier for companies to access the overseas bond market.
Fitch Ratings believes the growth in issuances may be driven by a need to refinance debt and fund capex once the investment cycle starts. The rating agency expects new issuers to access the overseas bond market. Real estate companies such as Indiabulls and Lodha Developers accessed the overseas bond market for the first time in 2014.
According to Singh, companies may look at other foreign currencies and not just the US dollar. Dollar-denominated bonds formed 72% of all international issuance in 2014.