Short-term Indian corporate bond issues rise as yields fall

MUMBAI, Nov 16 (Reuters) – Indian companies, especially shadow lenders, could continue to flock to the short-term corporate bond market to raise funds after yields fell, analysts said on Tuesday.

“Yields have corrected sharply as interest rate views have changed, and ahead of the next policy meeting issuers are racing to lock in funding at lower cost,” said Ajay Manglunia, Managing Director and Head of of the Investment Grade group at JM Financial.

Non-Banking Financial Companies (NBFC) Housing Development Finance Corp (HDFC.NS)Sundaram Finance (SNFN.NS)Aditya Birla Finance, HDB Financial Services aim to raise more than 125 billion Indian rupees ($1.54 billion) by issuing two- to five-year bonds this week.

Emissions line comes on the back of Bajaj Finance (BJFN.NS) raising 51 billion rupees via three-year bonds on Tuesday, and SIDBI raising funds last week via three-year plus bonds at a coupon of 7.47%, 28 basis points lower than it had paid for a similar show in mid-October.

“Given that many issuers were postponing their issuances in a volatile and rising interest rate scenario, they view this drop (in yields) as the right time to capture unmet bond demand and return to the market,” said Nagesh Chauhan, Head of Debt Capital Markets at Tipsons Group.

Yields on Indian corporate bonds eased by around 10-15 basis points last week, in line with falling government yields, as weaker inflation data in India and the United States lifted. increased bets on a central bank policy pivot.

The Reserve Bank of India has raised its key rate by 190 basis points to 5.90% since May, with the next move due in December.

Market participants expect the issuance model to remain in favor of shorter maturities.

“The trend will continue to be for short-term borrowing, primarily two to three years, as demand for longer-term bonds is still uncertain and only for certain public companies,” said Chauhan of the Tipsons Group.

Mutual funds, one of the largest holders of corporate bonds, receive flows into short-term debt programs where they seek to park their corpus, which further stimulates these issuances.

“There wasn’t a lot of supply of corporate bonds and mutual funds have to invest, so they’re looking for the limited spreads they’re getting in those NBFC bonds,” said Raju Sharma, head of securities at fixed income at IDBI Mutual Fund.

($1 = 81.3200 Indian rupees)

Reporting by Dharamraj Dhutia and Bhakti Tambe; Editing by Dhanya Ann Thoppil

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