Tuesday, January 31, 2012

India corporate bond yields steady, liquidity stays tight

Indian corporate bond yields closed little changed on Monday, with investors preferring to stay on the sidelines as liquidity in the banking system remained tight.

The five-year benchmark corporate bond yield ended unchanged at 9.44 percent, while the 10-year bond closed 2 basis points lower at 9.30 percent.

Indian corporate credit issuance is expected to gradually recover this week after the central bank desisted from signaling any near term cut in policy rates, dousing hopes that borrowing costs will decline soon.

National Bank for Agriculture and Rural Development (NABARD) plans to raise 7 billion rupees through three-year bonds at 9.48 percent, three sources with direct knowledge of the deal said on Monday.

But traders said that issuance was slow because of tight liquidity conditions.

"A lot of issuers are waiting for better liquidity conditions to hit the market, especially in the private sector," a senior dealer with a mutual fund said.

Indian Railway Finance Corp (IRFC) received first-day bids for more than seven times the base amount offered in its sale of retail bonds, signaling continuing appetite for debt from state-own firms despite lower returns.

IRFC is looking to raise atleast 30 billion rupees via a 10- and 15-year tax-free public bond issue, which has a green shoe of 33 billion rupees.

The spread between the 10-year corporate bonds and government debt of the same maturity widened to 81.24 basis points from 77.26 basis points on Friday.
Total volume in the corporate bond market was 20.97 billion rupees, higher than Friday's 10.30 billion rupees.

Source: http://www.reuters.com/article/2012/01/30/india-markets-corpbonds-idUSL4E8CU4TY20120130

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