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SBI mopped $1.25 billion in foreign debt sales through a dual tranche five-year and 10-year bond programme, the largest offering hitherto from a domestic issuer. The bank raised $750 million in a five-year tenure at the US treasury interest rate plus 205 basis points; it priced the 10-year $500 million issue at 225 bps over the treasury.
“The US Fed’s (Federal Reserve’s) tapering (of its monthly bond buying programme) will lead to a bit of interest rate tightening globally. Due to which, these people do want to go and tap the global debt capital market before rates tighten. From investors’ perspective, what we are seeing in the equities market, where foreign institutional investors are coming in and pouring in capital in the expectations of a stable government coming to power, we are seeing the same confidence in the bond market, too,” said Ravi Shankar, the India head of boutique investment bank Avista Houlihan Lokey.
Last month, the US Fed announced a further tapering due to more of economic recovery. This was the third such decision in recent months and the bond-buying programme now stands at $55 billion a month, after the further cut of $10 billion.
According to issue arrangers, due to the fear of rising interest rates in the international market, many companies and banks could hasten their bond issuances.
A senior official with a foreign bank said IDBI Bank was in discussion with bankers for floating a bond issue. The amount and timing was yet to be decided; it would depend on pricing and back-to-back demand for foreign currency resources from its clients.
An executive with the international banking wing of Bank of Baroda (BoB) said the fund requirement (for the bank) was there. Beside catering to the foreign exchange requirements of clients, the bank needed funds to buy India-related assets that foreign banks are offloading into the market. BoB has to also keep funds ready to meet repayment obligations for loans/bonds maturing in the near future.
Issue arrangers estimate that in 2013-14, international bond issuances had dropped to $11.4 billion from $13.7 billion a year before.
