SBI and NABARD bond issues draw strong investor response

The outcome underscores deep investor faith in SBI’s credit quality, along with the scarcity of long-tenor instruments that long-term investors such as provident funds, pension funds, and insurance companies actively seek

The bond market witnessed two standout issuances this week, with both State Bank of India (SBI) and NABARD attracting overwhelming investor response and raising impressive sums, reaffirming the strong demand for high-quality long-term paper in the Indian debt market.

Talking to Bizz Buzz, Venkatakrishnan Srinivasan, managing partner of Rockfort Fincap, says, “SBI’s Tier 2 bond issue, its first for the current fiscal year, mobilised Rs7,500 crore and was oversubscribed, drawing wide participation from Qualified Institutional Buyers (QIBs) as well as Non-QIB investors.”

The bonds were priced at a coupon of 6.93% annualised, which is significantly lower than prevailing market levels for similar tenors. When 10-year AAA-rated PSU bonds are trading between 7.05% and 7.10%, and state government securities (SGS) of similar maturity are yielding around 7.07%–7.13% semi-annual, the SBI cut-off rate stands out as distinctly aggressive. The outcome underscores deep investor faith in SBI’s credit quality, along with the scarcity of long-tenor instruments that long-term investors such as provident funds, pension funds, and insurance companies actively seek.

NABARD’s issuance, too, was a resounding success, receiving bids of more than Rs15,000 crore against a base issue size of Rs2,000 crore. The institution finally retained Rs6,825 crore out of the overall Rs7,000 crore issue size, reflecting the exceptionally strong appetite for AAA-rated PSU paper.

The twin success stories of SBI and NABARD highlight a revival in sentiment for long-term bonds and may well set the stage for a fresh wave of issuance from other leading banks and public sector entities in the weeks ahead. With such strong subscription momentum, the total mobilisation in October is likely to surpass the previous month’s figures, reinforcing confidence that the corporate bond market’s depth and investor participation continue to strengthen steadily.

MV Hariharan, former treasury head of SBI, says, “Excellent initiative because it's the most opportune moment to tap the markets.”

The pricing is expected to be really competitive, with even the IMF lauding the reforms and India increasingly seen as a growth engine for the world, he added.

The fact that SBI and NABARD are in the mix is interesting and encouraging since benchmarks are likely for more issuances.

RBI has been at the forefront to further reform and deepen the markets, particularly the bond markets.

In the days to come, a deepening bond market in India has the significant potential to make funds accessible, affordable and bring in more stability.