Rupee bond rush set to ease as RBI signals limited scope for rate cuts

Business Standard

10 hours ago

Aggressive liquidity infusions and a series of rate cuts this year, most recently a surprise 50 basis point cut to 5.5 per cent in June, pushed yields to the lowest in three years
Bloomberg
India's busy local-currency rupee bond market is poised to slow after the country's central bank hinted room for further rate cuts could be limited.
Aggressive liquidity infusions and a series of rate cuts this year, most recently a surprise 50 basis point cut to 5.5 per cent in June, pushed yields to the lowest in three years and spurred a flurry of issuance as borrowers sought to lock in lower rates.
As a result, Indian companies raised a record ₹6.6 trillion ($77.1 billion) through local-currency notes in the first half of the year, up 29 per cent from the year prior, according to data compiled by Bloomberg.
'Issuance will remain fairly strong, but the pace will not be as frenetic as before,' said Shameek Ray, executive vice president at ICICI Securities Primary Dealership Ltd., pointing to limited room for borrowing costs to fall further.
Yields on Indian debt have since started to climb. After touching the lowest since 2022 on June 6, average yields on top-rated three-year company notes have risen 13 basis points, as of Wednesday.
Still, the recent increases have only pared the drop in financing costs this year.
Monetary policy emerged as the key driver for corporate debt sales in India this year as falling rates lured conglomerates to the market. Grasim Industries Ltd. secured its lowest-cost onshore note since 2020 and the ports unit of Adani Group raised a record sum from the domestic bond market. Jio Credit Ltd., a shadow lender owned by tycoon Mukesh Ambani, sold its first-ever bond.
'Inquiries from companies about bond fundraisings have increased,' said Jigar Vaishnav, director at Tipsons Group. 'Abundant liquidity and cheaper borrowing costs have also prompted many companies to borrow locally rather than tapping offshore. It has been a very busy time on the desk.'
Still, global uncertainties and weaker capital spending due to slower economic growth could hurt corporate bond sales in the second half of the year, said Aditi Mittal, director at A.K. Capital Services Ltd., the third biggest rupee bond banker this year.