Rising corporate bond yields augur well for bank credit

Firms rated AA and below would find it cheaper to take a bank loan over a bond issue

With bond yields rising, it seems companies may find it more profitable to go back to banks for loans, rather than coming to the bond market.

This will partially break the emerging trend of ‘disintermediation’, or companies diversifying away from bank credit to other sources of funds, which started about two years back as banks refused to lower their lending rates, while the fixed income market incorporated every cut done by the central bank. 

The Financial Stability Report published by the Reserve Bank of India (RBI) in December, and subsequently a staff paper of the central bank, argued that the