RBI Boosts India Bonds Amidst Lighter Supply and PFC Debt Drive
Overview
Indian bond markets rally on Reserve Bank of India liquidity support and reduced state borrowing. Power Finance Corporation launches a ₹50 billion NCD issue offering up to 7.3% yield. Upcoming inflation data and SEBI's bond derivative plans add further market focus.
Bond Market Gains Traction
Bond Street opened on a positive note, with overall market sentiment improving. Government bonds are trading slightly firmer, supported by strong policy signals and easing supply pressures.
RBI's Liquidity Boost
Much of the strength is attributed to the Reserve Bank of India’s ₹500 billion open market operation (OMO). This injection of liquidity, widely anticipated, provides crucial support to bond prices by increasing market liquidity.
Easing Supply Pressures
Compounding the positive sentiment is lower-than-expected supply from state governments. Approximately 11 states plan to raise about ₹260.8 billion, a significant reduction from the initially indicated ₹361.9 billion. This reduced issuance alleviates concerns over debt saturation.
Corporate Action: PFC's Debt Offering
The corporate bond space is experiencing active participation. Power Finance Corporation (PFC) has launched the first tranche of its public issue of non-convertible debentures (NCDs), aiming to raise ₹50 billion. This issue, open from January 9 to January 30, could be the largest retail bond offering in nearly eight years if fully subscribed.
PFC is offering bonds with various maturities, including five, ten, ten years and one month, and fifteen years. The annual yields range from 6.8% to 7.3%, with the longest-term bond providing the highest return. The issue has garnered considerable investor interest.
Market Deepening Initiatives
Positive developments extend to market infrastructure. The SEBI chief recently indicated the regulator is examining the introduction of trading in bond derivatives, a move intended to deepen India’s corporate bond market. Furthermore, NITI Aayog has published reports suggesting measures to bolster the corporate bond ecosystem.
Inflation Data in Focus
Markets are keenly awaiting India’s consumer price inflation (CPI) data, scheduled for release on January 12. The figures are expected to significantly influence both the bond market's direction and the Indian rupee's performance in the near term.
