Investors Cautious In Bond Mkt As Borrowers Make Beeline In March

A cumulative issuance size of Rs4,000 crore per series (including the green shoe option), PFC's offering will test the appetite for both short and medium-term investments.

Mumbai: The Indian bond market is witnessing an issuance deluge in March as borrowers rush to raise funds ahead of the fiscal year-end. In the month of February too, primary bond issuers have mobilised more than 1 trillion. Despite yields inching higher and credit spreads widening against corresponding government securities (G-Secs), investor appetite remains robust. With a mix of public sector undertakings (PSUs), financial institutions, and corporates lining up issuances, the supply glut is testing the depth of the market.

Leading the pack, Nabard's re-issuance of its 7.40 per cent NCD maturing on April 29, 2030, garnered a full subscription at a yield-to-maturity (YTM) of 7.50 per cent. The Rs2,000 crore base issue, coupled with a massive Rs5,000 crore green shoe option, saw the entire Rs7,000 crore being absorbed, reflecting a strong demand for high-quality AAA-rated paper.

Hot on Nabard's heels, HUDCO is set to tap the market with a Rs700 crore issue (plus a Rs3,300 crore green shoe option) on March 10 via the NSE Electronic Bidding Platform (EBP). The 10-year bonds, rated AAA/Stable, will cater to long-term institutional investors seeking duration plays.

Power Finance Corporation (PFC) followed on March 13 with a two-tranche offering. It includes Series A, a short-duration 1-year, 29-day bond maturing in April 2026, and Series B, a 3-year, 3-month, 28-day issuance maturing in July 2028.

With a cumulative issuance size of Rs4,000 crore per series (including the green shoe option), PFC's offering will test the appetite for both short and medium-term investments.

Beyond these marquee issuances, the bond supply pipeline remains crowded.

They include Aditya Birla Housing Finance: Rs15 billion via August 2028 bonds, IREDA's considering Rs30-50 billion via perpetual bonds, and Canara Bank and a few other banks are expected to tap the bond markets.

Talking to Bizz Buzz, Venkatakrishnan Srinivasan, Founder and Managing Partner, of Rockford Fincap says, "While issuers are in a hurry to lock in rates before any further repricing of credit spreads, investors are taking a more cautious approach. The supply glut across corporate bonds and state development loans (SDLs) provides investors with ample choices, pushing them to demand higher risk premiums."

However, one factor working in favor of yields is the absence of G-Sec auctions this month, which could help cap any aggressive spike in rates, he said.

The interplay between demand-supply dynamics, systemic liquidity conditions, and external factors will be key in determining how the market absorbs this wave of bond supply.

Madhavan Kutty, Chief Economist, Canara Bank, says, "I think because more durable liquidity by way of OMOs and FX swaps are available now. Also when the call rate and treps rate is lower than 6 per cent, no point in locking money in VRR at /6.25 per cent."