Nabard scraps ₹7,000 crore bond issue as short-end yields stay elevated

Nabard withdrew a planned ₹7,000 crore three-year bond issue after bids stayed elevated, signalling muted transmission of the RBI's recent rate cut and pressure at the short end

State-owned National Bank for Agriculture and Rural Development (Nabard) on Monday scrapped its planned bond issuance of ₹7,000 crore, which comprises three-year bonds, due to elevated yields at the shorter end of the curve.

 

According to market participants, Nabard was expecting rates to soften after the liquidity infusion announcement last week, but the 10-year government bond yield rose to around 6.60 per cent from 6.52 per cent.

 

“Expectations are not matching”, said a market participant. “If issuers accept bids at these levels, the secondary market would have to reprice accordingly, which is why bids are being rejected,” the person added.

   

Nabard has withdrawn a bond issuance of the same amount for the second consecutive time. In late November, it had scrapped a similar ₹7,000-crore issue due to unfavourable market conditions.

 

Last week, Power Finance Corporation (PFC) also withdrew its scheduled bond issuances totalling ₹6,000 crore after investor bids came in at yields higher than what the issuer was willing to accept. This marked the third instance in the past two months of PFC pulling back a bond issue.

 

Earlier, PFC had also withdrawn a ₹3,000-crore three-year bond issue and a ₹3,500-crore 15-year bond issue on November 25 and December 10, respectively, amid elevated corporate bond yields.

 

Market participants said bids have not softened in line with expectations, highlighting muted transmission of the Reserve Bank of India’s recent 25-basis point rate cut and continued pressure at the shorter end of the yield curve.