Higher corporate bond yields are pushing issuers to postpone debt sales to the next quarter

Higher yields in the corporate bond market and the cancellation of four planned issuances within three weeks have led some issuers to postpone large-dollar fundraising until next quarter, investment bankers and investors say. Companies including Micro Units Development and Refinance Agency (MUDRA), Indian Bank and ONGC Petro have postponed debt sales worth 150 billion rupees ($1.68 billion) until the January-March quarter, which was originally scheduled for the end of December.

Many non-bank finance companies have also chosen to wait until the next quarter to tap the market.

Yields on AAA-rated corporate bonds have risen 20 to 30 basis points this month.

“Investors are demanding higher returns, even from AAA-rated issuers, due to a combination of tight systemic liquidity, higher government bond yields and increased risk aversion,” said Amar Ranu, head of investment products and insights at Anand Rathi Shares and Stock Brokers.

In the past three weeks, Power Finance Corp has withdrawn its planned issuances twice, while Indian Railway Finance Corp and SIDBI each canceled bond sales as investors demanded higher returns, which the companies were unwilling to give.

The three firms canceled bond sales totaling ‍225 billion rupees with maturities over a range of maturities. “Global uncertainty, tight domestic liquidity, rupee volatility and foreign capital outflows have kept investors cautious, resulting in higher returns contrary to market expectations post RBI policy,” said Vinay Pai, head of fixed income at Equirus Capital.

SILVER LINING IN LIQUIDITY

Still, the central bank’s recent liquidity boost could act as a bright spot for corporate bond yields, if not immediately, then in January-March.

The RBI’s liquidity injection should help stabilize yields, restore confidence and support both corporate issuers and investors, Equirus Capital’s Pai added.

($1 = 89.5230 Indian Rupees)