Indian state-run firms set to issue long term bonds to meet investor demand
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Indian state-run companies are poised to raise about 50 billion rupees ($595.61 million) through long-term securities over the next two weeks, as falling government bond yields and reduced state debt supply leave investors starved for opportunities.
At least four state-run firms—THDC India, NHPC, India Infrastructure Finance, and Indian Renewable Energy Development Agency — which have not been frequent issuers, are set to tap the market with bond offerings ranging from 10 to 15 years, according to three merchant bankers.
None of the companies replied to Reuters emails seeking comments. The merchant bankers did not want to be named because they are not authorized to talk to media.
"Since government bond yields have eased and even long-tenor yields are below 7%, insurance companies that have been seeing regular inflows are keen to add longer duration highly rated papers in their portfolios," said Aneesh Srivastava, executive director and chief investment officer at Star Health Insurance.
India's 10-year bond yields have stayed around 6.85%, while 15-year bond yield is at 6.90%. The 30-year and 40-year bond yields are around 6.97%-7.00%.
Companies have funding needs, and rather than waiting for the second half, they are capitalizing on strong investor appetite and improving liquidity conditions, said one of the bankers involved in the deals.
Government bond yields have eased on bets that interest rate cycle is set to turn initially in U.S. followed by India.
The Federal Reserve is expected to cut rates in September, while many traders eye rate cut from Reserve Bank of India in December.
"In a falling interest rate regime, investors will have to look out for window of opportunities to earn additional returns wherever possible," Star Health's Srivastava added.
Currently, the corporate bond yield curve is slightly inverted, with long duration bond yields marginally lower than short-end.
Sandeep Yadav, head of fixed income at DSP Mutual Fund, expects the corporate bond yield curve to remain flat, adding that even if the yield curve steepens, longer maturities will offer greater profit for the same yield movement compared to shorter maturities due to their higher duration.
($1 = 83.9475 Indian rupees)
