NTC likely to go for a placement

Outlook/CORPORATE BONDS

The National Textile Corporation might tap the market this week by making a placement of bonds. Last week saw banks and public sector undertakings hitting the Bond Street to raise funds for year-end provisions.

Power Finance Corporation, Dena Bank, Allahabad Bank and Indian Railway Finance Corporation were among those that raised money.

While banks need funds for their Tier-II capital, companies preferred to tap the market to fetch a better price as there are no other supplies in the market.

Corporate borrowers are waiting to hit the market after their borrowings plan for the new fiscal is sewn up.

However, as far as companies are concerned, overseas borrowings at a cheaper rate has proved to be preferred route.

While a rapidly growing company aiming at wider investor base is opting for foreign currency convertible bonds (FCCBs), public sector corporates that have no option for diluting their equity base have sought refuge in external commercial borrowings which are vanilla debt "" loans or bonds.

However, this week, the secondary market saw good volumes as rally happened following the activity in the government securities market. The spread between the five year paper and corresponding government security narrowed to 65 basis points.

Some spark in the secondary segment

The commercial paper market will remain lacklustre. Short-term capital requirements are being met by working capital demand loans and the interest rate on these is being pegged to commercial paper. The secondary market has become a bit active with investors who are finding difficulty in firming up a view on the long-term rates trend returning to CPs to gain from the short-term yield differential.

Moreover, with year-end nigh, banks and mutual funds prefer remaining invested in short-term commercial instruments.