At least four state-owned companies: THDC India, NHPCFinancing India’s infrastructure and Renewable Energy Development Agency of India – who have not been frequent issuers, are ready to take advantage of the market with bonus offers ranging from 10 to 15 years, according to three commercial bankers.
Neither company responded to Reuters’ emails seeking comment. The commercial bankers declined to be named because they are not authorised to speak to the media.
“As government bond yields have declined and even long-term yields are below 7%, insurance companies that have been seeing regular inflows are keen to add high-rated and longer duration securities to their portfolios,” said Aneesh Srivastava, CEO and Chief Investment Officer, Star Health Insurance.
Indian 10-year bond yields have been hovering around 6.85%, while 15-year bond yields are at 6.90%. Yields on 30- and 40-year bonds are hovering around 6.97%-7.00%. Companies are in need of funding and rather than waiting for the second half, they are taking advantage of strong investor appetite and improved liquidity conditions, said one of the bankers involved in the deals. Government bond yields have declined on bets that the interest rate cycle is set to turn, first in the US and then in India. The Federal Reserve is expected to cut rates in September, while many traders expect a rate cut by the Reserve Bank of India in December.
“In a falling interest rate regime, investors will have to look for windows of opportunity to earn additional returns wherever possible,” added Srivastava of Star Health.
Currently, the corporate bond yield curve is slightly inverted, with long-duration bond yields marginally lower than short-term bond yields.
Sandeep Yadav, head of fixed income at DSP Mutual Fund, expects the corporate bond yield curve to remain flat and adds that even if the yield curve steepens, longer maturities will offer higher returns for the same yield movement compared to shorter maturities due to their longer duration.
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