Indian companies should use current yields which are at multi-lowest of the year for raising long-term funds, according to the country’s largest rupee bond arranger since 2007.
“The market levels are absolutely fantastic, the absolute returns are quite low at multi-the lows of the year, the spreads are quite tight, ”said Neeraj Gambhir, group director and head of treasury, markets and wholesale banking products at Axis Bank Ltd., in an interview with Bloomberg Television. “Our suggestion to borrowers is that the current market scenario is very good and if they need long term financing, they should access the markets.”
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The companies borrowed an unprecedented 9.8 trillion rupees ($ 134.4 billion) through domestic bonds during the fiscal year ended in March as they built up cash reserves to meet the pandemic. The average yield on top-rated two-year rupee corporate bonds fell 15 basis points on Tuesday to 4.63%, the largest drop since May 17. Bonds hit a record low of 3.84% in April.
India’s central bank will likely have to purchase Rs 3-4 trillion in sovereign bonds during the fiscal year to support the government’s borrowing program, Gambhir said. He expects the benchmark 10-year yield to stay close to 6% for the “foreseeable future”.
The rupee is expected to stay around current levels and is not expected to depreciate immediately, Gambhir said.
“The strength of the rupee reflects the weakness of the dollar especially against emerging currencies and I don’t expect it to reverse significantly at any time in the near term,” he said.
The rupee was trading down 0.2% to 73 per dollar on Wednesday.
– With the help of Divya Patil and Karolina Miziolek