Reliance Industries to bet big on 5-year bonds before RBI decision: Report

The purchases by Reliance blazed through trading rooms in Mumbai, helping the five-year sovereign bond outperform as banks and brokerages sought to fulfill the orders, say sources

Reliance Industries Ltd., which runs one of India’s biggest treasury operations, went on a shopping spree for local five-year bonds just weeks ahead of a crucial central bank policy meeting, according to people with knowledge of the matter.

The company bought about $270 million worth of state bonds from a single state-run bank, according to one of the people, with others adding that total purchases may have exceeded $1 billion in last few days based on brokerage orders and trade deals reported on the central bank platform. The people asked not to be identified as the details are private.  

The purchases by Reliance blazed through trading rooms in Mumbai, helping the five-year sovereign bond outperform as banks and brokerages sought to fulfill the orders. They could reflect an attempt by the company to find the safest part of the yield curve as expectations grow that the Reserve Bank of India will tighten monetary policy soon. 

A Reliance Industries spokesperson didn’t immediately respond to an emailed request for comment.

The company, which was buying a mix of sovereign and local government debt maturing in 2026, bought debt on the central bank’s dealing platform as well as through direct deals with holders, the people said.

The yield on the 5.63% 2026 bond is down four basis points to 5.68% this week, outpacing the drop in the benchmark 10-year bond. 

Reliance, controlled by Asia’s richest man Mukesh Ambani, had cash and equivalent assets worth Rs 2.6 trillion ($35 billion) as of September 2021, according to its financial presentation. Last year, Reliance took a similar bet in corporate bonds with the similar maturity.

The purchases come ahead of an RBI meeting on Dec. 8, which will be keenly watched by investors to see what steps the central bank takes to normalize pandemic-era policy settings after it suspended bond purchases last month. IDFC Asset Management said last month they are “heavily overweight” on tenors of about five years on expectations that they will be less impacted by rate hikes.

Governor Shaktikanta Das has repeatedly assured markets that getting economic growth back on a firm footing was of paramount importance and he will ensure adequate liquidity. Still, rising inflation globally has seen swap markets start to price in rapid rate hikes.