Corporate bonds

Highest-rated issuers rush to raise funds via corporate bonds

According to data compiled from the BSE and NSE auction platforms, corporates and banks raised 25,089.70 crores between February 21 and 28, more than 75% less than the figure for the previous week.

By Manish M Suvarna

Fundraising through corporate bonds surged last week, with most companies and banks with AA ratings and above rushing into the market to complete their year-end borrowing program and lock in lower rates amid strong investor demand.

According to data compiled from the BSE and NSE auction platforms, corporates and banks raised Rs 25,089.70 crore between February 21-28, over 75% less than the previous week’s figure. National Bank for Agriculture and Rural Development, Small Industries Development Bank of India, Housing Development Finance Corporation and Union Bank of India are among the top issuers this week.

“Looking at demand from a portion of investors, many eligible issuers, especially public entities, are active in taking advantage of the rate advantage by issuing papers that can be placed with long-term investors before rates go up,” said Ajay Manglunia, CEO and Head, Institutional Fixed Income at JM Financial.

Market participants said investor demand had recently improved. These investors come from pension and provident funds, insurance companies and certain mutual funds, and finalize their investments before the end of the financial year. This has led to yields on some public issuers being priced at or below the level of government securities of similar maturities traded in the secondary market.

The recently issued corporate bonds of India Oil Corporation Ltd (IOCL), with a duration of 5 years, were subscribed and priced at 6.14%, which was lower than the government bond yield with a 5-year maturity in February 2027 trading on the secondary market. Marlet. The yield on corporate bonds fell by more than 20 basis points in February and currently the yield on a three-year bond fluctuates between 5.70 and 5.75%, that on five years between 6.02% and 6.09%, and those with 10 one-year bonds, it is between 7.05 and 7.10%.

“Some sections of the market like pension funds are allocating their portfolio to corporate bonds in line with their framework. This has led to demand exceeding supply at the moment,” said Sandeep Yadav, head of fixed income at DSP Mutual Fund.

Torrent Power, EXIM Bank, among others, are expected to tap into the market, dealers said.