Corporate Bond Issues Set To Touch Rs 11 Trn

Mumbai: Turbo-charged by falling yields, surplus liquidity, and strong investor appetite, India’s corporate bond market looks poised to break past the Rs11-trillion mark this fiscal year. Strong liquidity, falling yields, and robust investor appetite set the stage for a new milestone in India’s debt markets.

According to the latest Sebi data, corporate bond issuances in FY24-25 touched Rs9.87 trillion — a robust performance despite global headwinds. With the current fiscal starting on a high note, market insiders expect another record-breaking year as bond issuers aggressively tap the market to seize prevailing low-cost funding opportunities.

Following successive Repo rate cuts of 25 basis points each in February and April, the Reserve Bank of India (RBI) pivoted to an accommodative stance, reinforcing it with sustained liquidity infusions via Open Market Operations (OMOs) and Variable Rate Repo (VRR) auctions since April 1.

This liquidity flood has pulled AAA-rated PSU bond yields below the critical seven per cent threshold across the curve, compressing borrowing costs sharply. Issuances in April alone are likely to touch Rs90,000 crore to Rs1 trillion — a rare phenomenon for the month, typically considered a slow starter in the debt capital markets calendar.

With bank MCLR lending rates still elevated and benchmark-linked bank loans pricing higher than bond market yields, issuers have found domestic rupee bond placements an extremely attractive avenue to raise funds.

Borrowers, particularly AAA-rated PSUs, are making a beeline to the market to lock in fixed-rate funding below seven per cent across maturities — a window of opportunity that may not last long if rate dynamics shift later in the year.

Talking to Bizz Buzz, Venkatesh Srinivasan, Managing Partner, Rockfort Fincap, says: “What we are witnessing is a classic grab-the-cash environment. Issuers are moving swiftly to capture the spread advantage between bond yields and bank funding rates, reflecting a clear strategic preference for bonds over traditional loan financing.”

Despite concerns over global volatility, including geopolitical risks and uncertainty around advanced economy central bank policies, the domestic backdrop remains exceptionally supportive. Abundant liquidity, stable inflation, and a robust demand pipeline from provident and pension funds, mutual funds, and insurance companies are setting the stage for another landmark year, he said.