Lenders pull bond sales as yields move up

Mumbai: Two state-owned lenders withdrew rupee-denominated debt sales as fears of an additional government borrowing in the wake of the $20 billion tax-cut booster led to a spike in financing costs. Power Finance Corp pulled a sale of three-year notes of as much as Rs 5,000 crore ($705 million) on Friday and Bank of Baroda delayed its plan to sell as much as Rs 1,650 crore perpetual debt on Monday. Coupon bids received by both issuers topped their expectations, people familiar with the matter said.

“Due to a surprise change in the government’s policy regarding corporate tax during the course of our issuance, there was a lot of uncertainty in the market,” Kamal Mahajan, Head of Treasury and Global Markets at Bank of Baroda said by email. “We expect a better rate when the market stabilises.”

The average yield on top-rated 10-year corporate bond jumped 15 basis points on Friday to 7.94 per cent, the steepest gain since January. On Monday, rates fell five basis points to 7.89 per cent. Indian Renewable Energy Development Agency Ltd., the lone company that priced its notes after the tax cuts were announced, had to pay a coupon rate of 8 per cent.