India rate cut, liquidity boost spur $2.7 billion bond rush

MUMBAI: A rate cut and easy monetary policy guidance by India’s central bank lifted bonds on Friday, triggering $2.7 billion of issuance from state-run companies and lenders, bankers said.

Four state-run firms - REC, Housing and Urban Development Corp, Power Finance Corp and NTPC - and two state-run lenders Indian Bank and Bank of India will raise an aggregate of 240 billion rupees (about $2.7 billion) in the next two weeks, the bankers said.

The Reserve Bank of India cut its key repo rate by 25 basis points and left the door open for further easing as it boosted banking system liquidity by $16 billion in the next two weeks.

This pushed the 10-year government bond yield down 2-3 basis points and 15-to-40 year yields down 7-8 bps, boosting appetitefor long-term corporate bonds, the supply of which has been low.

“With policy clarity and a steady rate environment, many long-term investors are keen to lock in yields and diversify duration. As a result, well-rated public sector issuers are likely to see robust appetite for their upcoming bond placements,” Vineet Agrawal, co-founder of Jiraaf, a bond trading platform, said.

India rate cut fuels bond rally but 10-year ends steady

Indian firms have raised 10.07 trillion rupees through bonds in January-November, and supply for 2025 is set to hit a record.

PFC will aim to raise 35 billion rupees through 15-year bonds, while NTPC could raise 30 billion rupees through 10-year or 15-year papers, the bankers, who declined to be named as they are not authorised to speak to media, said.

HUDCO and REC are likely to raise up to 50 billion rupees each through 10-year deep-discount bonds, they said.

Bank of India aims to raise 30 billion rupees, while Indian Bank will look to raise 50 billion rupees through Basel III-compliant tier II bonds, according to the bankers.

The firms did not reply to Reuters’ emails seeking comment.

Bankers said that with the trajectory of yields seen downwards, insurance companies are expected to participate strongly in bidding for these AAA-rated papers.

“We continue to see room for an additional 25-basis-point repo rate cut,” said Sachin Bajaj, executive vice president and chief investment officer at Axis Max Life Insurance.