Banks, companies rush to bond market to lock lower rates

1 month ago 13

In its October policy, the RBI had announced 14-day VRRR auctions of Rs 6 lakh crore and had an enactment    of 28 days VRRR auctions. The RBI’s monetary argumentation  committee   is docket   to conscionable   connected  December 6 and the determination  volition  beryllium  announced connected  December 8.In its October policy, the RBI had announced 14-day VRRR auctions of Rs 6 lakh crore and had an enactment of 28 days VRRR auctions. The RBI’s monetary argumentation committee is docket to conscionable connected December 6 and the determination volition beryllium announced connected December 8.

By Manish M. Suvarna

Fundraising by companies and banks from the enslaved marketplace has accrued sharply successful the past 2 weeks arsenic they are looking astatine locking successful little rates successful anticipation of the Reserve Bank of India’s (RBI) argumentation successful December. The marketplace expects the cardinal slope to denote liquidity-tightening measures which volition summation borrowing outgo successful the coming days.

Additionally, marketplace participants besides expect that the RBI could summation the reverse repo complaint and marque the repo complaint an operational rate. Usually, astir issuers stay connected the sidelines and hold for the argumentation decision, but this clip the inclination seems to beryllium reversing. However, the enactment successful the secondary marketplace of firm bonds is connected clasp arsenic marketplace players are trading successful a bladed range.

In the past 2 weeks, according to information compiled from the BSE and NSE bidding platforms, companies and banks unneurotic raised Rs 36,747 crore, of which lodging concern companies person a large stock of Rs 14,190 crore. Banks and non-banking concern companies (NBFC) raised Rs 9,092 crore and Rs 9,828 crore, respectively, truthful far.

“Most of them are trying to fastener the little involvement complaint that is presently disposable successful the marketplace arsenic they expect liquidity to tighten considering RBI’s intentions to support little surplus liquidity successful the banking system, which volition yet person an interaction connected the involvement rate,” said Karan Gupta, manager – fiscal institutions, India Ratings and Research.

The output connected firm bonds crossed ratings successful the secondary marketplace is trading betwixt 5.35% and 5.45% connected three-year papers, 5.62-5.75% connected five-year papers, and 6.78-6.88% connected 10-year papers.

Market participants expect the RBI to proceed with its liquidity normalisation instrumentality viz adaptable complaint reverse repo (VRRR) to bring liquidity little which is presently successful immense surplus and bring the reverse repo complaint to 3.75%. The RBI is besides withdrawing liquidity by selling sovereign securities worthy Rs 1,435 crore successful the past 2 weeks successful the secondary market, which sucked retired a portion of the liquidity from the system. Currently, the liquidity successful the banking strategy is estimated to beryllium successful a surplus of astir Rs 8.58 lakh crore.

In its October policy, the RBI had announced 14-day VRRR auctions of Rs 6 lakh crore and had an enactment of 28 days VRRR auctions. The RBI’s monetary argumentation committee is docket to conscionable connected December 6 and the determination volition beryllium announced connected December 8.

The reverse repo complaint hike is expected successful 2 steps considering the caller microorganism variant. Usually, the corridor spread betwixt the repo and reverse repo is 25 ground points, but present it is astir 65 ground points. It was widened during the pandemic to marque borrowing outgo lower. “We expect the reverse repo to beryllium recalibrated to 3.75% till February policy. We expect the glide way successful VRRR to continue,” said Sandeep Yadav, caput of fixed income, DSP Mutual Fund.

Apart from this, dealers with brokerage firms and communal funds pegged the cardinal slope to support the repo complaint unchanged and support an accommodative stance.

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