Borrowing costs for companies saw a drop on Wednesday after the RBI surprised with a rate cut. Power Finance Corporation (PFC) raised R1,600 crore through 10-year bonds at a coupon rate of 8.20% on Wednesday evening. The PSU was earlier aiming to issue five-year bonds at a coupon rate of 8.32% and 10-year bonds at 8.27%, according to bond market experts.
“After the RBI’s surprise repo rate cut in the morning, the company deferred the bidding to evening, which was earlier supposed to be held at noon,” said a bond arranger close to the development.
PFC had issued 10-year bonds at a coupon rate of 8.65% in early January and five-year bonds at 8.36% in late February.
Bond market experts are confident that another cycle of yield compression for corporate bonds will be seen in the coming days. Many are of the view that the market will see a flurry of bond issuances, going forward, considering that the yields have softened to such levels. “The rate cut will be favourable for the bond market. We believe that the next round of yield compression will happen in the corporate bond market, at least by 10-12 bps,” said NS Venkatesh, chief financial officer, IDBI Bank.
Another PSU, Power Grid Corporation (PGC), has also raised R1,305 crore at a coupon rate of 8.15% through strip bonds at tenures of five years, 10 years and 15 years, a source said. The company had earlier kept an upper cap of 8.35%, according to a source. In January, PGC had issued strip bonds at a coupon rate of 8.20%, 5 bps above current levels.
“The overall sentiment will continue to remain positive. Bond yields have come down in the range of 5-7 bps,” said Lakshmi Iyer, head, fixed income, Kotak Mutual Fund.
