Eerie March for bond bazaar as war shakes top issuers

Corporate bond markets are navigating an unusual March this year, as borrowing plans stall in a month that typically sees a rash of bond sales. The surge in bond yields triggered by rising crude oil prices has prompted several borrowers to either defer plans to the next year or borrow selectively, five debt merchant bankers said.

Frequent issuers such as National Bank for Agriculture and Rural Development (Nabard) and REC Ltd withdrew planned bond issuances on Thursday after receiving bids at higher-than-expected rates. Corporate bond yields have climbed alongside government bond yields, after the war in West Asia sent energy shocks worldwide.

After rising 10 basis points to 6.78% on Monday, the yield on the 10-year benchmark government bond eased from Tuesday as the Reserve Bank of India (RBI) purchased government securities to inject liquidity. The 10-year yield ended Thursday at 6.66%. Corporate bond yields, however, did not ease as much due to selling by corporate treasuries and redemption from mutual funds, traders said. The yield on Nabard's 10-year bonds, considered a benchmark in corporate debt, rose 6 basis points (bps) to 7.45-7.50% on Thursday.

Bond cancellations, market timing

Global uncertainty has made both borrowers and investors cautious. Nabard cancelled its plan to raise up to ₹8,000 crore through July 2029 bonds on Thursday, but later said it would re-try on Monday. REC partially cancelled its borrowing plan, scrapping its proposal to raise up to ₹3,000 crore via March 2028 bonds, but raised the same amount through a March 2031 issue, after receiving strong demand from the Employees Provident Fund Organisation (EPFO) at 7.19%, traders said.

“The two-year paper of REC was pre-allocated, probably as long-term investors deployed cash, and the issuer also secured a reasonable rate as both sides’ interests matched,” a senior treasury official said.

On 4 March, Small Industries Development Bank of India (Sidbi), among the frequent borrowers in India's debt market, withdrew its plans to raise up to ₹8,000 crore through bonds maturing in July 2029. Earlier on 20 February, the National Bank for Financing Infrastructure and Development, also called as NaBFID, had cancelled the sale of the March 2029 bond issue of up to ₹5,000 crore because of high bids.

Emails sent to Sidbi, Nabard, NaBFID, PFC and REC remained unanswered.

International crude oil prices have been highly volatile this week as conflict flared in West Asia. On Monday, Brent crude surged past $100 a barrel, touching an intra-day high of $119.50—its highest since mid-2022—on fears of supply disruptions but fell by 6% on Tuesday after US President Donald Trump signalled the conflict could end soon, easing supply concerns. However, crude crossed $100 per barrel on Thursday after two oil tankers were attacked in Iraqi waters, forcing the suspension of operations at an oil terminal. Iraq is one of the world’s largest oil suppliers and has been India’s second-largest source of crude in recent years.

March malady

“The sudden spike in rates saw a few postponements of corporate bond issuances. March is usually a tight month from the demand of funds perspective. Hence, the strategy is to shift it to the next quarter. The success of this strategy depends on the trajectory of crude prices," said Gopal Tripathi, treasury head at Jana Small Finance Bank, adding, "it can go either way".

The postponements could weigh on overall borrowing in the March quarter, which is typically strong as companies rush to complete funding plans before the financial year ends.

“At this juncture, corporates would be risk-averse to raise funds through bonds at such elevated levels, and because of this, overall Q4 borrowing will also come down unless the domestic market decouples, which I don’t think would happen,” a senior treasury official at a large private sector bank said.

While RBI's government bond purchases have cooled benchmark yields somewhat, there is no similar support mechanism for corporate bonds. As a result, activity in the secondary corporate bond market has also slowed, and selling new bonds has become more difficult, traders said.

High bids

“I know that definitely, March bond issuances will get impacted, but companies that really need funds will come to the market. Overall, it is very clear that not many issuers will tap the bond market because the bidders will also bid higher,” Venkatkrishnan Srinivasan, founder at Rockfort Fincap said.

Usually, March sees strong investor demand for corporate bonds because supply tends to decline in the first quarter of the new financial year when companies seek board approvals and plan their borrowing programmes. However, that dynamic may not hold this time if volatility persists, Srinivasan said.

In FY26 till January end, 1,614 companies raised ₹7.29 trillion through private placements of corporate bonds, Securities and Exchange Board of India (Sebi) data showed. In FY25, 1,659 firms had borrowed ₹9.87 trillion through corporate bond sales, with 174 issuers mobilizing funds amounting to ₹1.17 trillion in March alone.

Infra bonds

Some banks may still tap the market through infrastructure bonds if investor appetite remains strong, Srinivasan said. Lenders such as Punjab National Bank, Indian Bank and Union Bank of India could explore such issues, after the strong demand seen for a recent green bond sale by Bank of Baroda.

So far in 2026, yield on the 10-year benchmark Nabard bond has risen 20-22 bps because of supply-demand dynamics and tight liquidity conditions.

With bond yields rising, companies and non-banking financial firms are increasingly turning to bank loans instead of tapping the debt market.

“Following the 125 bps reduction in the repo rate, the cost of bank borrowing currently appears relatively attractive compared to the rising bond yields. As a result, corporates and NBFCs are increasingly tilting towards availing their sanctioned working capital limits/ fresh loans,” VRC Reddy, treasury head at Karur Vysya Bank said.