State-run companies have raised 89 billion rupees ($1.07 billion) via the sale of bonds, amid strong interest from investors, who do not expect major spikes in yields, while a dearth of supply recently also aided, merchant bankers said.
Earlier in the day, Power Grid Corp raised 12.50 billion rupees via 10-year bonds, while Power Finance Corp raised 66 billion rupees through a combination of three-year and 10-year papers.
“There was demand from insurance companies and provident funds as they have been witnessing inflows,” said Ajay Manglunia, managing director and head of the investment grade group at JM Financial.
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Venkatakrishnan Srinivasan, founder and managing partner of debt advisory firm Rockfort Fincap, added that absorption was easy as “supply from state-run companies, especially at the longer end, has come after a while”.
MTNL, too, raised 10.55 billion rupees via 10-year bonds at a semi-annual coupon of 7.61%. The spread between this paper and the 10-year government bond yield has shrunk to around 40 basis points (bps), down from over 50 bps during the previous issuance in July.
Easing government bond yields have also led to an improvement in investor appetite on bets that yields may not rise much from current levels, merchant bankers said.
Indian benchmark 7.26% 2033 bond yield eased to 7.19% on Wednesday, down from a more-than-four-month high of 7.26% hit last week, even though U.S. yields have jumped and stayed elevated.
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Meanwhile, uncertainty over state debt supply is also pulling investors towards long-term bonds issued by state-run companies, traders added.
“The yields of state-run corporates are also better compared to state debt. This will ensure any such further issuance is well-taken,” a fixed income official from an insurance company added.