"The bond yield curve is heading towards steepening after the Reserve Bank of India (RBI) maintained pause on rates last week, going against the global trend," said Nagesh Chauhan, head of debt capital market at Tipsons Group. "It was a major reason for the aggressive demand at today's NTPC bond auction." Meanwhile, the three-year government bond yield was trading at 7.01% on a semi-annual basis, with the spread shrinking to the lowest since mid-November, according to Refinitiv data.
The government aims to issue a new three-year bond on Thursday and it bid at a yield of 7.05% in the when-issued segment, with traders expecting a sub-7% coupon. Supply from AAA-rated state-run companies is likely to be sparse in April, which also prompted aggressive bids from some private banks and mutual funds. SPREAD UNSUSTAINABLE Even though the spreads have shrunk, some market participants believe it may not sustain going ahead as the corporate bond supply is pegged to rise. "With domestic growth back on track, and positive demand outlook, we expect corporates and other financial institutions to tap the bond market much more this year," said Arun Srinivasan, senior executive vice president and head of fixed income at ICICI Prudential Life Insurance.
A pick-up in capital expenditure by both private and
state-owned firms is expected to boost India's corporate bond
market, pushing issuances to another record in FY24, bankers and
analysts said earlier this month.
"We believe that corporate bond spreads should widen
starting this quarter. Corporate bond spreads have been trading
at historical lows for the past two years," ICICI Prudential
Life Insurance's Srinivasan added.
($1 = 82.0400 Indian rupees)
(Reporting by Dharamraj Dhutia and Bhakti Tambe; Editing by
Janane Venkatraman)
