After a 4-month record in FY26, corporate bond issuances slow down in Aug

Indian corporates, after raising a record ₹4.07 trillion through debt in the first four months of the current financial year, have slowed down in August, with no major issuances seen so far amid elevated yields. 

Market participants said that the bond market is currently in a wait-and-watch mode due to multiple uncertainties amid supply pressures from state bonds and central government bonds. The key concerns include expectation of additional borrowing for fiscal deficit management due to GST rate cut, and global risks like US tariffs and trade tensions. 

Large non-banking financial companies — both private and state-run — which consists 60 per cent of the market have also stayed away in August as loan demand remained tepid with slowdown in economic activities. 

“Yields have hardened from around 6.30 per cent to 6.55 per cent over the past month, and corporates are unwilling to pay higher coupons. Despite liquidity in the system, rates are firming up as there’s little expectation of rate cuts. Until there is clarity on global uncertainties like the US tariff war, issuers are in no hurry to borrow. That’s why we haven’t seen any major corporate bond issuances in August,” said  Ajay Manglunia, Executive Director, at Capri Global Capital Ltd. 

On an annualised basis, the yield on AAA rated corporate bonds rose by 13 bps in August so far. The oversupply of corporate bonds in the first four months of the current financial year was followed by a surge in  bond yields in August, as expectations of a rate cut faded after hawkish remarks from the domestic rate setting panel. 

“The market is cautious and waiting for clarity from the government on whether it will borrow more to meet fiscal needs, especially in light of GST reforms, tariffs, and fiscal deficit management. The government has alternative funding avenues like small savings, divestments, and dividends, which could reduce the need for fresh market borrowings,” said Venkatakrishnan Srinivasan, founder and managing partner of Rockfort Fincap LLP. 

Corporate bond yields fell sharply in the first quarter, driven by the Reserve Bank of India’s 100-basis-point rate cut between February and June and substantial liquidity infusions, which made bond markets more attractive compared to bank lending. 

Market participants said that given abundant liquidity in the system, demand from banks, mutual funds, and insurance companies surged for the corporate bond during that period.  However, with limited supply of short-term G-Secs and government preference for long-term issuances, corporate bond issuers, especially in the AA/AA+ category, stepped in to meet the demand, flooding the market with short-tenor bonds by the end of July. 

Consequently, while demand remains strong, oversupply led to issuers being asked to offer higher yields. With August washed out, September also does not look bright for the corporate bond market. A section of the market believes such issues will come back in October as festival related demand kicks in.