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Banks' infra bond funding to turn expensive as investors demand higher returns

VCCircle

VCCircle · 5m ago

Banks' infra bond funding to turn expensive as investors demand higher returns

Indian banks face increased costs in raising funds through infrastructure bonds as investors seek higher returns amid a surge in debt supply. Domestic lenders have raised a record 892 billion rupees this fiscal year but face challenges as demand from long-term investors weakens, widening spreads between corporate and government bonds. Despite rising secondary market yields, institutional investors demand higher yields, affecting state-run banks and companies as they strive to meet fundraising targets.

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With rate cuts on the horizon, is it too late to invest in debt mutual funds?

Money Control

Money Control · 9m ago

With rate cuts on the horizon, is it too late to invest in debt mutual funds?

Indian debt mutual funds have become attractive to investors due to significant inflows from foreign institutional investors and the expectation of a rate cut by the Reserve Bank of India. The bond markets have already rallied with the rate cut expectation, leading to higher returns for long-duration bond funds, dynamic bond funds, and gilt funds. Fund managers have increased the durations of their portfolios, positioning themselves for further gains when the rate-cut cycle begins. While longer-duration bonds offer potential returns in a falling interest rate environment, the 1-3 year corporate bond segment may become attractive following the initial rate cut.

SBI raises Rs 10,000 cr via bonds to fund infra projects

YourStory

YourStory · 1y ago

SBI raises Rs 10,000 cr via bonds to fund infra projects

State Bank of India (SBI) has raised Rs 10,000 crore through its fifth infrastructure bond issuance. The issue was oversubscribed by four times and attracted bids in excess of Rs 19,884 crore. The funds will be used to enhance long-term resources for funding infrastructure and affordable housing segments. SBI Chairman Dinesh Khara hopes that this issuance will develop a long-term bond curve and encourage other banks to issue longer-tenor bonds.

Investors embrace risky bonds for better returns

Livemint

Livemint · 1m ago

Investors embrace risky bonds for better returns

Investors in India are increasingly turning to BBB-rated corporate bonds due to their higher yields, as the benchmark 10-year government bond yields have fallen. This trend is driven by online platforms that facilitate access to high-yield bonds despite associated credit risks. Wealthy investors and alternative funds are particularly interested, seeking better returns in a low-yield environment, evidenced by a record number of issuances in the fiscal year up to June 19.

Stable Indian government bond yields push investors towards more attractive corporate debt

Economic Times

Economic Times · 1m ago

Stable Indian government bond yields push investors towards more attractive corporate debt

Indian mutual funds and insurance firms are increasingly adopting an accrual strategy to capitalize on higher corporate bond yields, as government bond yields remain stable. Mutual funds prefer shorter-duration bonds, while insurance companies focus on longer-duration bonds, notably five to 10 years. The spread between corporate and government yields has risen, with corporate bond yields outpacing government bonds as the Reserve Bank of India tightens liquidity. This shift sees funds reallocating from government to corporate bonds for better returns.

Final norms on non-fund credit a boost to infra companies

Economic Times

Economic Times · 2d ago

Final norms on non-fund credit a boost to infra companies

The Reserve Bank of India's final guidelines on non-fund based credit facilities allow banks, alternative investment funds, non-bank lenders, and development finance institutions to provide credit enhancement. This enables infrastructure companies to improve their ratings and access more funding by freeing up bank limits. Now, regulated entities can provide partial credit enhancement to bonds issued by corporates and municipalities. These changes aim to boost infrastructure financing and integrate more companies into the bond market.

Foreign investors ditch India's pricey stocks, opt for new issues

VCCircle

VCCircle · 11m ago

Foreign investors ditch India's pricey stocks, opt for new issues

Foreign investors are selling expensive Indian stocks and turning to new listings in primary markets to seek cheaper exposure and better returns. This trend is driven by profit booking as Indian stocks trade at record highs and valuations higher than most major stock markets. Foreign investors have sold a net $3.42 billion worth of equities in the secondary market, but have purchased a net $1.47 billion through primary market issuances so far this month. The Indian primary market has seen IPO listings of $7.3 billion this year, the highest in Asia.

Apple prices first bond offering in 2 years

Economic Times

Economic Times · 3m ago

Apple prices first bond offering in 2 years

Apple raised $4.5 billion through bond offerings, its first in two years, to fund stock buybacks and debt repayment. The issuance included various bond maturities and attracted substantial demand, with orders hitting $10 billion. This activity is part of a broader surge in new debt offerings amid improving credit spreads and market conditions post-tariff relief announcements. High demand for investment-grade bonds reflects investor preference for stable returns amid economic uncertainties.

NBFCs lead India’s corporate bond market as private placements dominate: Jiraaf Bond Analyser

Economic Times

Economic Times · 18d ago

NBFCs lead India’s corporate bond market as private placements dominate: Jiraaf Bond Analyser

India's corporate bond market is witnessing significant growth, with Non-Banking Financial Companies (NBFCs) leading due to their reliance on capital markets for funding. Unlike banks, NBFCs depend heavily on capital markets and have ramped up bond issuances post-Covid. Banks have become cautious with bond issuances amid rising interest rates, preferring deposit mobilization. Private placements dominate debt issuance, providing efficiency, while regulators aim to promote public debt offerings for broader investor participation.

How Bond duration impacts return in a falling rate regime, Gautam Kaul explains

Economic Times

Economic Times · 13d ago

How Bond duration impacts return in a falling rate regime, Gautam Kaul explains

In a conversation with ETMarkets, Gautam Kaul of Bandhan AMC explains the critical role bond duration plays in portfolio returns during a falling interest rate environment. Bond duration reflects a bond's sensitivity to interest rate changes, impacting prices and returns. Investors are advised to consider duration and credit risk when choosing bonds, aided by SEBI's classification system. India's fixed income market offers stability with potential for increased foreign participation. The emerging market for ESG-compliant bonds is also growing.

Banks may go for short-term G-Secs with CRR cut in Sept

Economic Times

Economic Times · 1m ago

Banks may go for short-term G-Secs with CRR cut in Sept

With the anticipated September CRR rate cut, banks are expected to focus on short-term government securities instead of committing to longer durations due to muted credit demand and volatile bond yields. As banks manage excess liquidity, they may invest in safer, short-duration instruments like treasury bills and G-Secs, such as those with one to three-year maturities. This strategy comes amidst a slowdown in credit growth and evolving market conditions.

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