Latest India Central Bank Move Is Good News for Local Companies

(Bloomberg) -- Indian companies are benefiting from the most recent move by the central bank to keep borrowing costs in check.

Yields on top-rated corporate bonds maturing in ten years declined by as much as 30 basis points, traders said Tuesday, after the Reserve Bank of India announced measures to inject liquidity into markets through repo operations. The decline is the most in about four months, and short-term borrowing costs have also fallen.

The RBI on Monday said it will sell short-term and buy long-term sovereign notes, resulting in a decline in government debt yields off which corporate bonds are priced. Lower borrowing costs are a boost for companies reeling under the strains of the pandemic and an economy that’s suffered its worst quarterly contraction on record.

Bonds Rally in India After RBI Sends ‘Whatever It Takes’ Signal

Yields on AAA ranked three-year company notes dropped as much as 35 basis points on Tuesday, the most in more than a month, and borrowers are already moving to take advantage of falling funding costs.

Housing Development Finance Corp., India’s largest mortgage lender, plans to raise as much as 50 billion rupees ($686 million) by selling two-year notes at a coupon of 4.95% coupon, its cheapest local-currency bond ever.

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