Record Covid Rise Reverses a Rally in Dollar Debt: India Credit
A U.S. one-hundred dollar banknote and Indian ten rupee banknotes are arranged for a photograph in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Record Covid Rise Reverses a Rally in Dollar Debt: India Credit


Indian dollar bonds are starting to sputter amid fallout from a recent record surge in local Covid-19 cases, dragging down what had been one of the strongest rallies in Asia this year.

  • The notes have lost 0.3% this month, worse than a 0.2% decline for a broader Asian dollar bond gauge, according to Bloomberg Barclays indexes. That’s paring an earlier outperformance sparked by a strong economic rebound that pushed gains on the Indian debt securities to as high as about 1.3% in 2021 at one point
  • Also read: Rupee Tumbles With Stocks as Virus Cases in India Hit New Record
Record Covid Rise Reverses a Rally in Dollar Debt: India Credit
  • Goldman Sachs shifted to neutral on Indian investment-grade and high-yield dollar credits this month, citing its expectation of limited room for further outperformance amid the surging Covid-19 cases, analysts Kenneth Ho and Chakki Ting wrote in a note
    • The global bank lowered its forecast for India’s real GDP growth for the year that began on April 1 to 11.7% from 12.3% earlier
  • Performance of corporate dollar bonds from India will be driven by perceptions of the country’s ability to get control of the outbreak, said Todd Schubert, head of fixed-income research at Bank of Singapore. Investment opportunities may arise in sectors less affected by the infection surge, such as renewable power credits, if there is a broader selloff, he said
  • Some bonds in that sector have dropped recently too. The yield on India Green Energy’s dollar note due in 2024 has climbed to 4.3% from 3.4% in late February, while Continuum Energy’s 2027 bond yield rose to 4.3% from 3.9% in the same period
Record Covid Rise Reverses a Rally in Dollar Debt: India Credit
  • Indian banks’ and shadow lenders’ asset quality might come under pressure again as a second wave of infections threatens a fragile economic recovery, according to Fitch Ratings. Financiers are major bond issuers from India.
  • The rapid increase in Covid cases is also credit negative for Indian airports due to the adverse impact on passenger and aircraft traffic, according to Moody’s Investors Service

Primary Market - Worst Start Since 2008

  • Companies are off to their slowest start in a financial year for rupee bond issuance in 13 years with the amount plunging to 24 billion rupees ($319 million) since April 1, Bloomberg-compiled data show
  • The slump comes after new rules from markets regulator Securities & Exchange Board of India came into effect April 1. The regulations require borrowers to obtain due diligence certificates from debenture trustees before listing their securities
Record Covid Rise Reverses a Rally in Dollar Debt: India Credit

Secondary Market - Long-Tenor Yields Drop

  • Yields on top-rated rupee corporate notes maturing in 10 years are falling for a fifth straight week, the longest such streak in over a year, after the Reserve Bank of India outlined more measures last week to support the economy
  • By contrast, yields on shorter-term corporate debt have increased on expectations of higher inflation and growth
  • The central bank took a step last week toward formalizing quantitative easing, pledging to buy up to 1 trillion rupees of government bonds this quarter, to keep benchmark borrowing costs low
  • Indian government and corporate bond markets were shut April 13 and April 14 for local holidays
Record Covid Rise Reverses a Rally in Dollar Debt: India Credit

Best and Worst Performing Corporate Dollar Bonds Year-to-Date

Best PerformersReturn (%)
Vedanta Resources due April 2026+16.2%
Tata Motors due May 2025+2.9%
ABJA Investment due July 2024+0.9%
Worst PerformersReturn (%)
Indian Railway Finance due Feb. 2030-8.6%
Adani Electricity Mumbai due Feb. 2030-6.5%
Power Finance due April 2030-6.6%

©2021 Bloomberg L.P.

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