Cracks Emerge in India’s Bond Market After Worst Week Since 2013
(Bloomberg) -- A global credit crisis sparked by the coronavirus pandemic is starting to register more in India, as speculation mounts that a move to lock down much of the country may be too slow to stop millions of potential infections.
Average yields on top-rated three-year rupee corporate bonds jumped 32 basis points last week to 6.87%, the steepest rise since 2013. Note sales have slumped to the lowest for a March in four years, as the rupee sinks to record lows. A petrochemical venture of India’s biggest energy explorer pulled plans on Friday to sell securities, following a similar move by at least one other company recently.
India had largely avoided the worst of the pandemic-induced sell-offs that struck globally from last month as growth in confirmed coronavirus cases there had been slow. But the mood has now changed, with the former head of the Indian Council for Medical Research’s Centre for Advanced Research in Virology warning the nation’s epidemic could grow to be worse than in Italy or Iran. That’s threatening progress getting past a shadow banking crisis, which is dragging on economic growth already set for its weakest pace in 11 years.
Gujarat-based ONGC Petro Additions Ltd. on Friday withdrew plans to sell as much as 5 billion rupees ($65.8 million) in a two-part offering because rates were higher than expected.
National Bank for Agriculture and Rural Development on March 13 deferred plans to sell bonds after investors sought higher yields than the company had initially indicated. It came back to price securities last week but had to settle for a smaller size and a higher cost of funds than in a similar earlier deal.
Read more about the global credit market rout here
The fact that some of India’s most highly rated companies have had to delay offerings raises doubts whether a promised intervention by the central bank will be enough to turn the tide. If things are that bad for the safest borrowers, they could be about to get really ugly for smaller companies, which represent about half of the economy.
The focus in local credit markets now turns again to Nabard, which has sought bids for a two-part offering on Monday and to state-owned REC Ltd., which plans to raise funds through a 10-year bond sale the next day.
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