India’s bond market has picked up pace as the 50-year government bond received an overwhelming response from institutional investors, especially from large insurance companies. It is the first 50-year bond issued by the government following market demand.
“The new 50-year government bond auction was oversubscribed by at least 4 times against an auction amount of Rs. 10,000 crore,” says Venkatakrishnan Srinivasan, founder of Rockfort Fincap LLP, a financial advisory firm. Its data shows RBI has received bids totalling Rs. 40,200 crores, with the cut-off yield at 7.46 per cent, slightly below the market expectations.
Meanwhile, the state governments have stepped up their market borrowings through RBI.
According to RBI on Friday, Assam, Punjab, Bihar, Goa, Telangana, Haryana, Jammu & Kashmir, Rajasthan, Karnataka, Maharashtra, Uttar Pradesh, West Bengal, and Tamil Nadu will participate in the weekly auction of state development loans (SDLs) on November 7.
The Rockfort data shows these states are expected to auction SDLs worth Rs. 25,750 crores, as against Rs. 21,600 crores in the indicative borrowing calendar for the quarter.
Bihar is offering the highest interest rates at 7.71 per cent for its SDL maturing in November 2038. Other states are also offering attractive rates starting at 7.5 per cent and upwards.
RBI has also announced the auction of T-bills for three months, six months, and 364 days with an indicative yield of 6.9 per cent, 7.04 per cent, and 7.13 per cent, respectively.
The corporate bond market, too, has picked up pace.
The State Bank of India, Titan Company, Larsen and Toubro, Summit Digital Infrastructure, Satin Creditcare and many others have raised funds from the bond market. Adds Srinivasan, “We do expect many large corporates and banks to raise funds from the bond market in November.