Indian banks are selling the most dollar-denominated debt in at least a decade, taking advantage of near-zero US benchmark rates after the Reserve Bank of India (RBI) Governor D Subarrao raised borrowing costs six times.
ICICI Bank, the second-largest lender by assets, sold $1 billion of 10-year bonds on Tuesday at an estimated spread of 325 basis points (bps) more than similar-maturity treasuries. The spread on its last sale of five-year debt on October 14 was 338 bps. This adds to the $6.6 billion raised overseas this year by the nation’s banks, topping the $4.6 billion issued by Chinese lenders.
Subbarao’s rate increases have pushed the government 10-year yields up 42 bps to 8.01 per cent this year, compared to 2.52 per cent for treasuries. India’s overseas bond-rush helped sustain a 21 per cent increase in bank lending in the year through October 22, even as RBI sought to slow the fastest inflation after Argentina in the G20 nations.
“India’s economic growth is high and this increases the financing needs of Indian banks and corporates,” said Cornel Bruhin, a fund manager in Zurich at Clariden Leu AG, which manages $3.5 billion of emerging-market debt, including that of Axis Bank and ICICI.
The yield on government notes due in 2020 rose three bps yesterday, widening the gap to 548 bps over treasuries of similar maturity. The spread reached 567, or 5.67 percentage points, on October 20, the widest since 2001. The wholesale-price index climbed 8.6 per cent in September, while consumer prices rose 11.1 per cent in Argentina and 1.1 per cent in the US.
