On Tuesday, the National Housing Bank (NHB) raised ₹4,800 crore at 7.35 per cent through seven-year bonds. It had aimed to raise ₹5,000 crore, with a ₹1,000 crore base issue and a ₹4,000 crore green shoe option. Meanwhile, REC secured ₹1,995 crore at 7.99 per cent via perpetual bonds, slightly below its ₹2,000 crore target.
Earlier this week, Indian Renewable Energy Development Agency (IREDA) raised ₹820 crore at 7.40 per cent through 11-year bonds.
More big players are lining up to tap the market. National Bank for Agriculture and Rural Development (Nabard) plans to raise ₹7,000 crore via bonds maturing in 10 years and three months, while the Small Industries Development Bank of India (Sidbi) is looking to secure ₹6,000 crore through bonds with a four-year and three-month tenure. Power Finance Corporation (PFC) is also in the fray, aiming to raise ₹4,000 crore via four-year and 10-month bonds, along with a ₹4,000 crore bond reissue.
“In January, most issuers waited for two key events — the RBI’s monetary policy review and the Union Budget. The expectation was that a rate cut and measures towards easing liquidity, along with borrowing numbers and a fiscal road map, would help soften yields. With events both now behind us, issuers are moving swiftly to complete planned borrowings before the financial year ends,” said Ajay Manglunia, MD & head-fixed income, InCred Capital Financial Services.
The flood of bond issuances has driven corporate bond yields higher compared to January, when supply was scarce. A tight liquidity situation has also pushed up government securities (G-sec) yields, exerting further upward pressure on corporate bonds. G-sec yields have risen by at least five basis points since the RBI’s policy meeting, where the six-member Monetary Policy Committee (MPC) cut the repo rate by 25 basis points.
January’s extreme bond yield volatility was largely due to global uncertainty emanating from Donald Trump’s return to the White House and fluctuations in US Treasury yields, noted Venkatakrishnan Srinivasan, founder and managing partner at Rockfort Fincap LLP. Many issuers delayed borrowing, creating pent-up supply that is now flooding the market.
With March typically bringing tight liquidity due to financial year-end tax outflows and increased bond issuance, issuers are rushing to raise funds before the market gets crowded, ensuring they secure funding without facing aggressive pricing pressures, Srinivasan said.
Meanwhile, the gap between yields on government securities and AAA-rated corporate bonds has widened to 35-40 basis points, up from 20-25 basis points last year, indicating a hardening of yields even for higher-rated issuers. Market participants also observed a steepening yield curve, with short-term yields holding steady while long-term yields have climbed.
“While institutional investors have shown strong interest consistently in large-ticket issuances, they remain yield-sensitive in February, often comparing corporate bond yields with state development loans (SDLs). This has resulted in many issuers accepting only partial subscriptions, forcing them to return to the market with follow-on issuances to meet their funding targets,” Srinivasan added.
As March nears, the interplay between bond supply, liquidity constraints, external risks, and investor appetite will be crucial in shaping yield movements.
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