Nabard withdraws its planned re-issuance of bonds worth ₹7,000 crore

Nabard withdrew its planned Rs 7,000-crore bond reissuance after weak investor response and demands for higher yields amid volatile market conditions

State-owned National Bank for Agriculture and Rural Development (Nabard) on Friday withdrew its planned re-issuance of ₹7,000 crore bonds after investors demanded higher yields. Bids worth only around ₹3,000 crore were received against the targeted issuance amount, sources said.

 

“Bids worth around ₹2,000 crore for Nabards’s July 2029 bonds came in at a yield of 7.79 per cent. The base issue size was ₹2,000 crore, with a greenshoe option of ₹5,000 crore. However, total bids received were only around ₹3,030 crore, leading to the withdrawal of the issue,” a market participant said on the condition of anonymity. 

 

This comes amid a broader trend where most issuers in recent months have preferred shorter-tenor borrowings in the 2 to 3-year segment, driven by the West Asia crisis, daily yield volatility, an uncertain interest rate outlook, and overall investor caution.

 

 

“Nabard scrapping its bond issue despite being among the highest quality AAA issuers reflects a deeper shift currently taking place in the bond market. The development indicates that the market is increasingly pricing the possibility of tighter funding conditions, persistent volatility and upward pressure on rates. Investors are therefore demanding higher yields even from the strongest issuers in the market,” said Venkatakrishnan Srinivasan, founder and managing partner, Rockfort Fincap LLP.

 

At the same time, the market has already seen over ₹7,000 crore of floating rate bond issuances in recent periods, reflecting a clear investor preference towards floating benchmarks and reset-linked structures instead of locking into fixed-rate exposure, he said, adding that this indicates that market participants presently expect either continued rate volatility or limited comfort on the future rate direction.

 

“The concern is further amplified by flattening and inversion pressures across parts of the curve, where shorter maturity yields are moving very close to longer tenor yields. Such market conditions generally discourage aggressive duration positioning and create reluctance towards fixed-rate deployment even in relatively shorter tenor bonds,” he said. 

 

This week, state-owned National Bank for Financing Infrastructure and Development (NaBFID) raised ₹4,000 crore through 10-year bonds at a cut-off yield of 7.74 per cent. This was significant development in the current bond market environment, where most issuers in recent months have preferred shorter-tenor borrowings.