PFC withdraws three-year bond issue as yields remain elevated in market

The state-owned lender raised ₹2,500 crore through a 15-year bond at a 7.55 per cent cut-off coupon, but withdrew its three-year issue after receiving bids at higher yields

Power Finance Corporation (PFC) withdrew its planned three-year bond issuance on Monday as bids came in at yields higher than the company had expected, while it accepted ₹2,500 crore through a 15-year bond at a cut-off coupon of 7.55 per cent.

 

The state-owned power sector lender had invited bids for ₹2,500 crore through the three-year bond and ₹2,500 crore through the 15-year bond.

 

The company received bids worth ₹6,995 crore across 93 bids for the 15-year bond, with yields ranging from 7.34 per cent to 7.60 per cent. The highest number of bids was received at 7.53 per cent, where investors bid for ₹1,344 crore, followed by ₹1,219 crore at 7.54 per cent.

 

 

The withdrawal of the shorter-tenor issue comes amid a rise in yields in the corporate bond market, particularly at the shorter end, as investors have turned cautious following the recent hardening in government bond yields.

 

Government bond yields have risen over the past week amid concerns over the outlook for liquidity and foreign fund flows. Market participants said investors were seeking higher spreads over government securities for corporate bonds, making it difficult for issuers to raise funds at the levels they were targeting.

 

“The withdrawal of the three-year issue indicates that the company was unwilling to accept the higher borrowing cost demanded by investors,” said a dealer at a state-owned bank.

 

Corporate bond yields have hardened in recent weeks in tandem with the government securities market. The rise has been more pronounced in shorter-tenor bonds, which had earlier benefited from expectations of improved banking-system liquidity following the Reserve Bank of India’s concessional swap schemes.

 

The RBI’s decision to close the FCNR(B) swap window a month earlier than scheduled has, however, weighed on market sentiment, particularly at the shorter end of the government bond curve. This has also increased caution among investors in corporate bonds.

 

Further, REC Ltd plans to raise up to ₹6,000 crore through two series of non-convertible debentures (NCDs) on Thursday.

 

The company will offer a two-year and two-month bond maturing on October 31, 2028, and a 10-year and two-month bond maturing on October 31, 2036. Both series have a base issue size of ₹500 crore and a greenshoe option of ₹2,500 crore.

 

The bonds will carry annual interest payments and have been rated AAA/Stable by CARE Ratings, CRISIL, ICRA and India Ratings.