At the end of the second quarter of the financial year 2020-21, the spread of corporate bonds over the same period government securities (G-Secs) has decreased. In the second quarter, it reached the level before the corona. This information was given by the rating agency Investment Information and Credit Rating Agency of India Limited (ICRA). According to the ICRA, the announcement of efforts by the central bank (RBI) to increase liquidity and the increasing interest of investors towards corporate bonds have helped to reduce spreads.
174% bond issue
The daily average spread of AAA rated bonds above government securities in the 10-year segment was 80 basis points (bps) in September, compared to 111 bps in February this year. Talking about the 5-year segment, it was 54 bps in September and 57 bps in February. Investors’ interest in the bond issue was better. 2.2 lakh crore bonds were issued in the second quarter of this financial year. This is 53 percent more than the same period last year. Talking about the first half of this financial year, it increased by 174 per cent to 4.47 lakh crore in the bond issue.
Less need to keep the balance sheet liquidity higher
Sector head of ICRA’s financial sector ratings, Anil Gupta, said that the increasing willingness of investors in the debt capital market has improved the certainty of the fund at competitive rates. He believes that this will reduce the need for corporate and non-banks to maintain more balance sheet liquidity as seen in the first half of FY 2020-21 due to uncertain financial environment.
Expected increase in fresh bond issue
Icra expects the fresh bond issue to increase in the financial year 2021 and will increase from Rs 6.55 lakh crore in the last financial year 2020 to 8-8.2 lakh crore this time. The redemption of corporate bonds is estimated at Rs 4.95 lakh crore this year and along with this the outstandings of corporate bonds will go up to 35.5-35.8 lakh crore which is an 9.2-10 per cent year-to-year increase for this financial year.