In order to bring the economy back on track, the rate of debt has become the cheapest in 15 years. This has greatly increased the attractiveness of the domestic bond market. In such a situation, bond issuers are running fast towards India’s debt market for the first time. Yoga teacher Baba Ramdev is also included in this.
Yoga Guru Baba Ramdev’s Patanjali Ayurved Limited and software tycoon Azim Premji’s Wipro Enterprises Private Limited are among 91 companies that have been net sellers of Rs. This is a rebound position from 2019. Last year, only 61 firms started their bond markets.
There will be more depth in the debt market
The increase in debt bond sales will further deepen the debt market, which will provide more options for investors. Also, the risk of borrowers buying notes will also be increased, which lacks track record. For issuers, a debt deal is an opportunity to create cash buffers in a sluggish economy. India’s bond-sales boom is in line with the boom in debt offerings across Asia. Because policymakers have put more and more cash in the market to fight the coronavirus epidemic.
Costs lower for selling bonds
The cost to sell a bond is usually lower than to get a loan in India, as banks are curbing lending to fight the world’s worst debt ratio. The average yield of the top-rated three-year notes has been 5.09 per cent, which is 221 basis points cheaper than the same tenure loan in the country’s largest lender State Bank of India.
Indian policymakers announced a record stimulus package in view of the financial fallout from the Coronavirus epidemic recently. This has reduced the cost of borrowing on bonds. FedBank Financial Services Limited is one of the firms that has launched its bonds due to supportive measures by policymakers.
The market welcomed relief measures
Some investors were afraid that Kovid-19 relief measures are showing the true picture of business credit health. But bond yield premiums show that the market has welcomed the move. The spread between the top-rated three-year corporate note and the government debt in the same tenor fell to 22.4 basis points last month. This is the lowest level since October 2005. This difference was at 23 basis points on Friday. In contrast, in India’s sovereign bond market, yields have risen due to concerns over record debt supply last week. At the same time, inflationary pressure is indicating the central bank to pause interest rates for a long time.