Overseas bond issuances by Indian companies and banks hit $7.6 billion in the first six months of 2017. Over the last few weeks, spreads at issues — the difference between the bond yield and the benchmark yield during first-time issuance — have trended down.
Neville Fernandes, head of debt capital market origination, Citi India, said these are record volumes surpassing those in CY2016 and CY2015. “With bond yields in most of the developed world still near historic lows, global investors are chasing higher yielding emerging-market debt including India,” Fernandes points out.
Vijayan Subramani, managing director, treasury and markets, DBS Bank India, observed that there was a fair bit of refinancing to be done.
Subramani said the appetite for emerging market assets has increased and investors’ ability to take risks continues to improve. The supply-demand mismatch is another factor that has maintained the appeal for Indian papers.
The Reserve Bank of India recently tightened the rules for issuing masala bonds. Under the latest norms, every issuance requires a nod from the central bank. “The masala bonds segment may not see any major pick up in coming times. Issuers are not ready to pay the premium which comes with the development of a new market in these masala bonds. If somebody wanted to take an exposure to Indian risk, there are better asset classes which provide the India risk with much better liquidity,” he said.