State-owned Small Industries Development Bank of India (Sidbi) cancelled its scheduled bond issuance worth ₹8,000 crore on Wednesday after investor bids came in at yields higher than the issuer was willing to accept.
The issuer received bids worth ₹5,079 crore for its three-year bond issuance, with most yields ranging between 7.28 per cent and 7.44 per cent. “They could not even receive bids for the entire amount, and the ones received were really high,” said a dealer at a state-owned bank.
Investor sentiment has dampened as global financial markets react sharply to the latest escalation of geopolitical tensions in West Asia, market participants said. However, Bank of Baroda’s (BoB’s) ₹10,000 crore green infrastructure bond issuance was priced meaningfully tighter than comparable state government securities (G-secs) of similar tenor, suggesting a clear greenium for the transaction.
The seven-year bonds were priced at around 7.1 per cent, and the bank exercised the greenshoe option to retain the full issue size, reflecting strong appetite from long-term institutional investors. “…The pricing came in finer than comparable state G-secs of similar maturity, and the bank appears to have achieved a greenium, given that this was a green infrastructure bond issuance. Interestingly, while long-tenor AAA bank bonds are being absorbed comfortably,” said Venkatakrishnan Srinivasan, founder and managing partner of Rockfort Fincap LLP.
Market participants said that while longer-tenor AAA-rated bank bonds are witnessing healthy demand, short-term AAA issuers are finding it harder to raise funds at finer levels. Large pension funds, insurance companies, and provident funds continue to favour longer-duration, high-quality assets to conform to regulatory investment norms and liability profiles.
With a relatively lower supply of bank bonds so far this year, several institutional investors still have headroom to deploy funds. Following the success of BoB issuance, other large banks with board approvals in place and near-term funding requirements may consider accessing the bond market in the coming weeks, market participants said.
