The anticipation of HDFC, India's largest mortgage lender, executing an interest-rate hedge once it completes its mega bond sale this week, is driving longer-duration bond yields lower, traders said on Wednesday. The lender aims to raise at least 50 billion rupees ($603.4 million) through the sale of 10-year bonds on Thursday, with an option to retain an additional 200 billion rupees. To convert the fixed coupon payments on these bonds to floating payments – to match the interest rate profile on the loans it issues – HDFC is considering total return swaps, bankers with direct knowledge of the matter told Reuters. New Delhi aims to raise 280 billion rupees ($3.39 billion) through the sale of bonds on Friday, in its penultimate debt auction of this financial year. The auction will include 120 billion rupees of 7.26% 2033 bond , which will soon replace the existing benchmark bond.
Market sentiment had turned cautious after a spike in India
and U.S. retail inflation rates, cementing bets of more rate
hikes.
The U.S. Federal Reserve has raised interest rates by 450
basis points (bps) since March 2022 and is widely expected to
further raise them by 50 bps over the next three months, while
the Reserve Bank of India has raised rates by 250 bps since last
May.
Last week, the RBI raised the repo rate for the sixth
consecutive time by 25 bps to 6.50% and kept the door open for
more tightening after saying that core inflation stayed
"sticky".
($1 = 82.6550 Indian rupees)
(Reporting by Dharamraj Dhutia
Editing by Eileen Soreng)
