Spreads on long-term corporate papers have widened, with long-term gilt prices going down. This widening spread is fuelling trading interest in the corporate debt market that has been lying dull for some time.
However the trading is of mixed interest as most players are unwinding long-held positions and booking profits to get into new papers as there have been quite a few primary issues in the market unlike a few weeks back.
For the third year in a row, state-owned Rural Electrification Corporation (REC) plans to raise around Rs 4,500 crore through the issue of capital gains bonds.
These bonds will have a face value and issue price of Rs 10,000 and the minimum application size is ten bonds at this price and multiples of one bond thereafter.
REC Capital Gains Bond series III, which has got an AAA credit rating from Crisil, is yet to make a foray into the market.
BSES is expected to tap the market to raise Rs 250 crore with a 10-year paper at 6.35 per cent. Indian Railway Finance Corporation is also likely to hit the market shortly but details are yet to be finalised.
A large portion of the trades last week was believed to be sales by mutual funds, who booked profits.
Commercial paper
Although there were very few primary issues of commercial papers, non-convertible debentures continued to be issued in the market.
As per the figures released by the weekly statistical supplement of the Reserve Bank of India, issues reported for the fortnight ended July 31 stood higher at 1399 amounting to a total of Rs 7557 crore.
However, most of them are expected to be roll over of previous issues. Primary issues of corporate bonds as well as commercial paper have gone up of late.
Various requests for borrowing in foreign currency through the external commercial borrowing route have been rejected by the government as the domestic market is flush with rupee liquidity.
