Corp bonds spread at pre-COVID-19 level
Fresh bond issuances are expected to rise to Rs.8.0-8.2 trillion during this fiscal, up from Rs.6.55 trillion during FY2020, estimates ICRA Ratings.
With estimated redemption of Rs.4.95 trillion in FY2021, the volume of corporate bonds outstanding is estimated to rise to Rs.35.5-35.8 trillion, translating in a Y-o-Y growth of ~9.2-10% for FY2021.
Meanwhile, the spreads on corporate bonds over government securities (G-sec) of similar tenure has declined to pre-COVID-19 levels by the end of Q2 FY2021, according to ICRA Ratings.
Apart from liquidity infusion measures announced by the regulator since the onset of pandemic, improved investor appetite for corporate bonds has also supported the decline in the spreads, said ICRA on 2 Nov 2020.
Improved investor appetite is also reflected in strong bond issuance of Rs.2.2 trillion (+53% on Y-o-Y basis) during Q2 FY2021, which followed an equally strong issuance of Rs 2.3 trillion during Q1 FY2021.
With two robust consecutive quarters, the bond issuances rose to Rs.4.47 trillion during H1 FY2021 (+174% on Y-o-Y basis).
“Though the targeted long-term REPO operation (TLTRO) funding was largely utilised by the banks in Q1 FY2021, the momentum in bond issuance during Q2 FY2021 reflects improved appetite across investor segments,” said Anil Gupta, ICRA Sector Head – Financial Sector Ratings, giving further insights into the market.
“Given the regulatory stance of maintaining an accommodative stance of monetary policy and surplus liquidity environment, the issuances could remain strong and spreads are likely to remain narrow over the next few quarters,” he said.
“With improved investor appetite and vibrancy in the debt capital market, the certainty on availability of funding at competitive rates has improved,” said Gupta.
“This could also reduce the need for maintaining high on-balance sheet liquidity by corporates and non-banks as was witnessed during H1 FY2021, amid the prevailing uncertain funding environment.” #banking #bonds #investment #economy /fiinews.com
