Corporates line up bond issues

OUTLOOK: Corporate bonds

The corporate bond market is likely to see some issuances in the coming weeks. This is because, with the downgrade of General Motors and Ford, overseas syndication has become expensive.

This, along with the rising London Interbank Bid Offer Rates (LIBOR) - the international benchmark for interest rates "" is affecting bond spreads.

Indian Oil Corporation is lining up a bond issue to raise around Rs 1000 crore for five years. Some banks, financial institutions and public sector corporates are also firming up plans to tap the market. CPs in demand for raising short-term funds

Even as corporates, banks and FIs are finalising their long-term borrowing plans, commercial papers (CPs) are the most popular instrument for corporates to raise short-term funds.

It is easier to raise money via CPs and roll it over at frequent intervals as long-term rates have firmed up in line with the yields on benchmark government securities.

Moreover, backed by surplus liquidity in the system, short term rates have come down.

Recap: The spread between a triple A, five-year bond and an underlying government security has narrowed down to 35 basis points as gilt yields have shot up sharply. A total of 1585 commercial papers were floated in the fortnight ended April 30, amounting to Rs 15,199 crore.

The interest rates ranged between 5.50 and 6.65 per cent.