Corporate bond issuances likely to resume after RBI's dovish pause

REC plans ₹7,000 crore issue on Friday; NABARD next week

After the Reserve Bank of India's Monetary Policy Committee retained the policy repo rate with a dovish tone, corporate bond issuances are expected to pick up, with Rural Electrification Corporation (REC) planning to raise up to ₹7,000 crore through bonds on Friday. National Bank for Agriculture and Rural Development (NABARD), which withdrew its bond issue earlier this week, is also expected to return to the market next week, dealers said.

 

REC will tap the market through two non-convertible debenture (NCD) series on the NSE Electronic Book Provider platform on Friday. The base issue size is ₹500 crore for the three-year-and-20-day bond, with a greenshoe option of ₹2,500 crore, taking the total issue size to ₹3,000 crore. The bond will mature on August 31, 2029.

 

The company is also offering a 15-year-and-20-day bond with a base issue size of ₹800 crore and a greenshoe option of ₹3,200 crore, taking the total issue size to ₹4,000 crore. Market participants said the company may exercise the greenshoe option depending on investor demand.

 

Market participants said the RBI's policy outcome has improved sentiment in the corporate bond market after issuance activity slowed ahead of the policy review.

 

"The tone was dovish and G-sec yields have come down, which has improved sentiment," said a dealer at a state-owned bank.

 

NABARD is also expected to return to the market next week after withdrawing its ₹8,000 crore five-year bond issue earlier this week as investors sought higher yields than the issuer was willing to accept.

 

"The NABARD issue that was withdrawn will most likely come back next week," said a market participant. "The higher yield was bid because of the large amount of issuance," the person added.

 

The issue had received bids worth about ₹7,166.5 crore across the offered coupon range, falling short of the targeted amount. Dealers had attributed the weak response to the large issue size and the rise in market yields ahead of the RBI's monetary policy decision.

 

With the policy uncertainty now behind the market and the central bank indicating that liquidity conditions will remain comfortable, dealers expect primary bond issuances to gather pace over the coming weeks.