By Dharamraj Dhutia
Indian companies increased the issuance of bonds maturing in five years or less in June, as the yields on such notes crashed after the central bank announced a raft of dollar-attracting measures that reduced the cost of funds.
Firms raised over 1 trillion rupees ($10.50 billion) through bonds in June, of which 60% were raised through these short-term bonds, up from 45% in May, data from Prime Database showed.
Here are more details:
Companies raised over 600 billion rupees through shorter-duration bonds, dominated by three- to five-year tenors
LSEG AAA-rated benchmark three-year bond yield tumbled 60 basis points, while five-year yield plunged 55 bps last month
Yields posted their biggest monthly drop in over six years, leading to a rush in debt issuances
Companies had raised around 430 billion rupees through the sale of up to five-year bonds in May, which was around 45% of the total proceeds
RBI will bear hedging costs for non-resident foreign currency deposits of 3-5-year maturities raised by banks, and also will subsidise overseas borrowing for lenders and state-run firms.
The two- to four-year AAA-rated corporate bonds offer a more attractive risk-reward profile, Anurag Mittal, senior executive vice president & head of fixed income, UTI AMC, said
"Spreads still provide a reasonable valuation cushion, while easier liquidity and lower domestic issuance should support performance. They offer a cleaner way to benefit from improving liquidity without taking excessive duration risk," he said
($1 = 95.2475 Indian rupees)