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Economic Times
5 days ago
- Business
- Economic Times
Corporate bonds to gain as RBI easing cycle nears, says Suresh Darak of Bondbazaar
As India inches closer to a potential monetary easing cycle, the corporate bond market is poised for renewed to Suresh Darak, Founder of Bondbazaar, expectations of rate cuts in late 2025 or early 2026 could significantly boost corporate bond issuance, as companies look to lock in lower borrowing costs. Falling yields on government securities are also likely to drive investor appetite toward high-grade corporate bonds, improving pricing and deepening market participation. In an exclusive conversation, Darak outlines the emerging trends shaping India's bond landscape—from the rise in short-term issuances and evolving retail participation to the growing appeal of ESG bonds. Edited Excerpts – ADVERTISEMENT Q) We have already seen 100 bps rate cut from the RBI. Historically, how does a rate cut cycle influence corporate bond issuance in India?A) Rate cut cycles have historically had a positive impact on corporate bond issuance in India. As the RBI lowers policy rates, borrowing costs for corporates reduce, prompting companies to tap the bond market for refinancing or expansion at more favourable terms. Simultaneously, falling yields on government securities encourage institutional investors to seek higher returns in AAA rated corporate bonds (led by increase in spread between Gsec and AAA rated bonds), boosting demand and improving pricing for issuers. Many corporates also use this period to shift from short-term to longer-tenure borrowings. Additionally, investors holding long-dated G-Secs or high-grade bonds often benefit from capital gains in the secondary market as yields fall. Q) With rate cuts expected, do you foresee a significant uptick in corporate bond issuance in the coming quarters? A) While a rate cut in the upcoming August policy is unlikely, expectations are building for easing to begin in late 2025 or early 2026. ADVERTISEMENT Once monetary easing begins, it is likely to trigger a significant uptick in corporate bond issuance, as issuers seek to lock in lower borrowing shift in interest rate expectations will also improve risk appetite among investors, further supporting issuance volumes. ADVERTISEMENT Q) There's been a pick-up in short-term corporate bond issuance recently. What's driving this trend?A) Short-term corporate bond issuance (up to 5 years maturity) has seen a marked rise, largely driven by interest rate expectations and improving liquidity conditions. In May 2025 alone, Indian companies raised ₹61,200 crore via five-year bonds—nearly a threefold jump from ₹21,400 crore in May fund allocations to 1–5 year bonds have grown significantly, driven by better system liquidity and attractive spreads of 30–40 basis points over comparable alternatives. Issuers are also preferring shorter tenors amid uncertainty around the timing and quantum of rate cuts. ADVERTISEMENT Q) Are retail investors showing interest in short-term corporate bonds or is demand largely institutional?A) Retail participation in corporate bonds has increased meaningfully over the past two years, aided by SEBI's regulatory reforms such as enhanced market accessibility to increase transparency, lowering of Minimum Investment Amount (i.e. Face Value from Rs. 10 Lacs to now Rs. 1 Lacs / Rs. 10,000 / Rs. 1,000) have opened the door for more individual retail this progress, retail investors still account for less than 2% of the overall corporate bond market and institutional investors continue to dominate the market. ADVERTISEMENT Q) What's driving the growing popularity of these instruments? What sectors are leading India's ESG bond issuance?A) ESG bonds are swiftly transitioning from a niche product to a mainstream funding tool in India. This shift is driven by growing investor focus on sustainable finance, regulatory clarity from SEBI, and the global push for decarbonisation. SEBI's updated ESG framework has enhanced transparency, enabling issuers to attract a broader and more diverse investor base, often at more competitive FY 2025, ESG bond issuance in India stood at ₹8,743 crore across 27 deals, with most issues witnessing strong oversubscription. The renewable energy sector led the charge, with active issuers like ReNew, IREDA, and Avaada. Infrastructure giant L&T raised ₹500 crore through India's first listed sustainability-linked bond (SLB), while the Pimpri Chinchwad Municipal Corporation's green bond issuance of ₹100 crores received 5.13× Vertis Infrastructure Trust (formerly known as Highways Infrastructure Trust) has successfully raised ₹900 crore through a Sustainability Linked Bond (SLB), marking the largest SLB issuance by an Indian InvIT to date. With growing demand, pricing benefits, and widening sectoral participation, ESG bonds are becoming an increasingly important capital-raising tool for companies focused on sustainable and future-ready business models. (Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
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Business Standard
08-07-2025
- Business
- Business Standard
Why are short-term bonds in demand? Bondbazaar's Darak breaks it down
Bond market investors are looking beyond short-term geopolitical noise, anchored by strong domestic fundamentals, surplus liquidity, rate cuts and a dovish RBI Nikita Vashisht New Delhi Listen to This Article Bond yields on the 10-year Government securities have declined gradually so far in calendar year 2025. Despite inflation-related uncertainty due to the US President's tariff policies, SURESH DARAK, founder, Bondbazaar, tells Nikita Vashisht in an email interview that debt market investors remain constructively positive on bond market outlook. Edited excerpts: How do you assess H1-2025 for bond markets and what does H2 look like? Corporate Bonds and Sovereign Bonds witnessed a decline in yields in the first half of calendar year 2025 (H1-CY25). While 10-year Gsec declined 42 basis points in H1, the Corporate Bonds declined by ~70 bps -
Mint
05-06-2025
- Business
- Mint
How to Predict Central Bank Action: Policy Decision making on Currency and Rates
This article endeavors to analyse macro-economic scenarios, specifically impacting India rates and currency market. This further helps to look into crystal ball by forecasting policy actions by the central bank. The write up should help market participants and treasury leaders from bank or corporates to frame prudent data-driven and actionable views. Treasury departments in most large corporates are the key profit drivers for the shareholders. For anyone heading active treasury functions, the utmost important skill to succeed in such roles is the ability to predict central bank actions. Liquidity is the game changer than Rates Current RBI regime under new Governor has been quite nimble in the actions while shifting the banking system liquidity towards surplus zone. Repo cuts on its own does not have much impact on economy or market rates. 'Term premium' is the key driver for longer term rates in debt capital market and the same helps in rate transmission to bank credit. So, RBI has been pro-active in liquidity management like never before by unleashing all possible long term infusion tools like CRR , OMO and Forex swap. As market experts, we are required to look for lead indicators while predicting RBI action. For example, Open market (OMO) Purchase announcement in April is 1st time in past 20 odd years, when RBI started buying Central Govt securities from market at the start of FY26. This is very strong yield signal from the central bank that they want to keep Gsec yields lower and then induce other rates like corporate bond and bank MCLR to come off. Currency movement: Give INR a fair chance INR could not get a fair chance to appreciate against USD during 2020-24 and even though record amount of FPI flows received during this period. All such flows were absorbed by RBI without even allowing for slightest INR appreciation. Any such central bank action is the perfect backdrop for sharp INR depreciation, as foreign investors entirely shift to long USD / short INR side of market. USD / INR currency pair broke out of a tight range in Nov 2024 and moved towards 88 levels. My views on global currency and rates published in Nov 1st week actually predicted this INR move from 83 to 87 within January 2025, due to the US Govt change and probable tariff driven uncertainties. New RBI regime has allowed INR to move in both directions and even market witnessed larger moves within a week, which were not there earlier during a full year period. So, natural forex volatility is back, which is healthy market condition for both importer and exporter to take active hedging decisions. Forecasting Growth, Inflation and Macro Stability We, as treasury heads in large corporates, keep looking at lead indicators in both global and Indian economies to forecast growth and pricing momentum. Globally GDP prints should be lower in coming quarters, due to overall uncertainty created after tariff conundrum starting April. In the US, stagflation (slow growth and sticky inflation) is already priced into the financial markets as US Treasury 10 Year rate stabilizing near 4.40 – 4.60 band.. India FY26 growth, to the extent dependent upon export of goods or services, could slow down in Q1 and Q2. Further, war related disruptions in May have somewhat impacted consumption momentum. However, indigenous contribution of India's GDP like consumption and investment are looking better. This is driven by low interest rate and consequently better credit pick-up in manufacturing sector. While India CPI projection is under control near 4% handle till Oct-Dec quarter, unique problem for our core CPI is the surge in gold prices. India being large consumer of gold jewelry, resultant service inflation will be higher to that extent. RBI broadly follows the framework to evaluate macro-economic stability by a weighted summation function of Fiscal deficit, Inflation and Current Account Deficit. The lower the output of this function, the better is the economic health of the country. RBI Monetary Policy Actions going ahead While analyzing all the above indicators and the evaluation model mentioned, I foresee RBI to utilize this window of opportunity of stable local macro parameters, by cutting Repo till 5.50 from current 6.00 levels till Aug – Oct 2025. There is paramount need to push growth momentum by fueling the bank credit and incentivizing lower corporate bond rates in debt capital market. Few tweaks in policy rates like lower SDF rate compared to current corridor and indicating more OMO purchase in June, will be more powerful to cut the term premia in market rates. This article is written by Diptangshu Chatterjee Dy ED, Head of Treasury & Corp Finance, Dalmia Bharat Limited Note to the Reader: This article is part of Mint's promotional consumer connect initiative and is independently created by the brand. Mint assumes no editorial responsibility for the content.
