Corporate bond issuers caught in a bind | Economic Times

Mumbai: Rising yields have taken a toll on companies raising money from the local debt markets. Primary market sales dried up significantly in the past two weeks, with top rated Power Finance Corp, too, cancelling a bond sale.Meanwhile, LIC Housing Finance and Rural Electrification Corp. paid 15-20 basis points more than the usual for three-year bonds.To be sure, Life Insurance Corporation is buying bonds, preventing the yields from stiffening further.Individual investors/borrowers could not be contacted immediately.The largest insurer is said to have invested in the 10-year papers sold by the Rural Electrification Corp at 7.25%, about 20 basis points lower than secondary market trades in similar papers.A basis point is 0.01 percentage.The borrower paid about 22 basis points higher than the similar rated peer raising three-year money Wednesday."Investors have turned skeptical as they expect the rates to move up," said Ajay Manglunia, managing director and head of debt capital market at JM Financial. “Unless the market foresees a directional shift in the benchmark yield movement, the corporate bond market will take time to come back to normalcy.”"Borrowers on the other hand are unwilling to offer higher rates within a short span of time such as a week or fortnight for 20-30 bps,” he said.Power Finance Corp aimed to raise 15-year money for which investors reportedly sought 7.40-7.45%, about 20-25 basis points higher than the primary sale that had taken place earlier in August, dealers said.The market sentiment turned negative after July consumer prices came in at 6.93%, much higher than the RBI’s comfort zone, and the latest Monetary Policy Committee hinted at least a pause in the easing rate-cycle."Institutional investors are a bit cautious about investing in shorter duration instruments amid the uncertainty in rate trajectory," said Saurabh Tripathi, fixed income head at ASK Wealth Advisors. LIC Housing Finance paid 5.45% selling three-year bonds, compared with 5.40% offered by HDFC.The benchmark bond yield jumped 32 basis points in the past one month pulling prices down.But yields improved by four basis points Wednesday. In its first auction as part of the Operation Twist, the central bank bought old market benchmark papers at 6.08 percent yield versus 6.15 percent in the secondary market levels.