Mumbai: Indian companies are planning to put the bond issues on hold as they await a direction on government borrowing from the interim budget scheduled for next week.
“This will be a relatively quiet week. Why should the issuers pay a higher yield if they could get off with more competitive coupons next week?” said a senior merchant banker.
Corporate bond yields rose 20 basis points (bps) in January and continued rising this month, before falling sharply on Friday, after the Reserve Bank of India (RBI) governor pledged to keep the bond market stable as the government ramps up its borrowing in coming months.
Government officials have said any extra borrowing will be detailed in the interim budget on 16 February.
Bankers say any higher-than-expected government borrowing will push up the yield on the 10-year corporate bond by about 8-10 basis points.
“However, the structure of the borrowing is awaited, and the assurance from (RBI governor) Subbarao is what has given companies the confidence to wait and watch,” said a banker.
The government has completed most of its Rs700 billion additional borrowing and Friday’s Rs80 billion federal bond auction would be the last one under the current indicative calendar.
Central Bank of India will sell Rs2.7 billion of Tier-II bonds on Tuesday, and bankers say others like UCO Bank and Corporation Bank have also lined up issues, but will likely price their bonds next week.
Power Finance Corp has a Rs1.5 billion bond issue open, and Gujarat NRE Coke Ltd on Monday said its board has approved the sale of Rs10 billion of bonds with warrants.
The spread between the 5-year corporate and government bond yields was at 280.51 bps, higher than 279.53 bps the prior week.