Tag: bond

Canara Bank raises Rs 1,500 crore via Basel-III compliant bond, BFSI News, ET BFSI

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New Delhi, State-owned Canara Bank on Thursday said it has raised Rs 1,500 crore by issuing Basel-III compliant bonds. “Our bank came out with issuance of Rs 1,500 crore of additional tier I bonds on 30th November 2021.

“The bank received total bid amount of Rs 4,699 crore, out of which full issuance of Rs 1,500 crore was accepted at 8.05 per cent,” Canara Bank said in a regulatory filing.

To comply with Basel-III capital regulations, banks globally need to improve and strengthen their capital planning processes.

These norms are being implemented to mitigate concerns on potential stresses on asset quality and consequential impact on performance and profitability of banks.

Shares of Canara Bank closed at Rs 207.10 apiece on BSE, up 0.15 per cent from the previous close.

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Auction of three G-Secs aggregating ₹24,000 crore sails through

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The auction of three Government Securities (G-Secs) aggregating ₹ 24,000 crore sailed through on Thursday, with the cut-off on the widely-traded benchmark 10-year G-Sec coming in about 2 basis points lower vis-a-vis the previous close.

The cut-off yield on the benchmark 10-year G-Sec (maturing in 2031 and carrying coupon rate of 6.10 per cent) came in at 6.3441 percent against the previous closing yield of 6.3612 per cent.

The cut-off price on the aforementioned G-Sec was about 12 paise higher at ₹ 98.25 against the previous close of ₹ 98.1275. Bond yields and prices are inversely correlated and move in opposite directions.

The Government mopped up ₹13,000 crore through auction of this paper.

A dealer with a public sector bank said G-Sec yields trended lower on the back of thaw in the US treasury yields. Further, buoyant tax collections and expected pick up in public sector disinvestment are likely to ensure that the government may not go in for additional borrowing.

In the secondary market, yield on the 10-year benchmark G-Sec closed lower at 6.3455 per cent against the previous close of 6.3612 per cent. Price of this security ended up about 11 paise at ₹98.24 against the previous close of ₹98.1275.

Brickwork Ratings, in a recent, report opined that yields are expected to maintain a hardening trend in the short and medium term, and the 10-year gilt yield is expected to remain at around 6.25 per cent in the short run and rise to 6.5 per cent in the later part of the second half (H2) 2022 owing to the augmented government borrowings and the inflationary trend.

The Government raised ₹4,000 crore via auction of the Floating Rate Bond maturing in 2034 at a cut-off yield of 4.8827 per cent and cut-off price of ₹99.25.

Further, the Centre mopped up ₹7,000 crore via auction of a new G-Sec maturing in 2061 at a cut-off yield of 6.9500.

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Festival season brings cheer to bond market

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Although the week was short due to the festive season and yield movements were narrow, all the newsflow last week turns out to be positive for the domestic bond market. The benchmark yield closed at 6.36 per cent on Wednesday, down by almost 3 basis points compared to the week before.

Global events

On the global front, the US Fed announced tapering of its bond buying programme on much anticipated lines at $15 billion per month. The 10-year US treasury yields, which had been having a negative impact on the domestic bond market, cooled down to 1.45 per cent last week compared to 1.56 per cent the week before. Brent crude prices also softened a bit, even nudging the $80/barrel mark last week before closing near the $83/barrel level.

Domestic development

On the domestic front, the Centre announced an excise duty cut of ₹5 per litre on petrol and ₹10 per litre on diesel last week. Bond dealers say this will be a positive for the market which expects the yields to fall further down to near the 6.3 per cent mark. Meanwhile, the Reserve Bank of India continued to absorb the excess liquidity out of the system even as it conducted a 15-day variable rate reverse repo auction where the cut-off rate stood at 3.99 per cent. The central bank accepted offers worth ₹4.34 lakh crore against the notified amount of ₹5 lakh crore.

Subdued CPI expected

This week, the market is looking forward to the announcement of the consumer price index inflation print. Market participants say the CPI figure will most likely stand below the 4 per cent mark owing to the base effect for October, post which it may slightly start moving up gradually.

Vijay Sharma, Senior Executive Vice-President at PNB Gilts opined that so far, all the developments seen during the week are positive for the domestic bond market. “The two factors that were responsible for the upward movement in yields have turned positive over the last few days. The US Treasury yields came down even as the Fed decision on tapering stood pretty much in line with the market expectations. Crude prices coming down and a cut in excise duty are also conducive for the yields. It seems the benchmark yield could move towards the 6.3 per cent level in the short term. The inflation print for October is expected to come down below 4 per cent, mostly due to base effect.”

 

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Exim Bank lists billion-dollar 10-year bond on AFRINEX

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Export-Import Bank of India has listed its $1-billion 10-year bond on the Mauritius-based pan-African exchange AFRINEX.

Pravind Kumar Jugnauth, Prime Minister of the Republic of Mauritius, K Nandini Singla, High Commissioner of India to Mauritius, and Harsha Bangari, Managing Director, Export-Import Bank of India, rang the digital bell on AFRINEX to mark the listing of Exim Bank’s bond.

Exim Bank’s 10-year bond, issued in January 2021 at a coupon of 2.25 per cent, was the bank’s fourth transaction in the 144A/Reg S format.

Axis Bank completes pricing of overseas AT-1 bonds

“This listing (on October 25, 2021) is India Exim Bank’s maiden foreign currency bond bell ringing on AFRINEX,” the bank said in a statement.

Exim Bank’s bonds are also listed on Singapore Exchange Securities Trading, London Stock Exchange’s International Securities Market, and India International Exchange (IFSC).

Bangari said AFRINEX will serve as a gateway for broadening the investor base of issuers in the African continent, along with that of the world.

Harsha Bangari takes charge as Exim Bank chief

AFRINEX is an initiative by the Government of Mauritius to set up a pan-Africa exchange and become an international financial centre, Exim Bank said. The initiative is supported by the Government of India. BSE Technologies Ltd is the technology and skill partner of the exchange.

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China to speed up local bond issuance to support slowing economy, BFSI News, ET BFSI

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BEIJING, – China intends to accelerate the pace of local government special bond issuance to bolster investment and economic growth, the finance ministry said on Friday, striving to complete the annual quota by the end of November.

Policymakers are seeking to support a faltering recovery, as economic growth in the third quarter was the slowest this year, due partly to power shortages and wobbles in the property sector.

China’s local governments issued a net 2.22 trillion yuan ($346.97 billion) in special bonds in the first nine months of 2021, accounting for 61% of the annual quota, Li Dawei, an official at the finance ministry, told a briefing.

“The pace of issuance has quickened significantly since August,” Li said.

“We will strive to complete the 2021 special bond quota by the end of November to continue to promote the positive role of special bonds in local economic and social development,” he said.

China has set an annual quota of 3.65 trillion yuan for local government special bonds, which mainly fund infrastructure projects, this year.

The figures suggest that local governments could issue a monthly average of 717 billion yuan in special bonds in October and November, a sharp increase from the first nine months.

About half of the funds raised from the special bonds in January-September went to transport, urban infrastructure and industrial parks, with the rest going to affordable housing, education and health care sectors, Li said.

China’s fiscal revenue fell 2.1% in September from a year earlier due to slowing economic growth and statistical base effects, Liu Jinyun, a second ministry official, told the briefing.

“Fiscal revenue growth is likely to show a downward trend in the next few months,” Liu said, adding that the government remains on track to achieve its planned revenue this year, and the budgeted spending will be guaranteed, Liu said. Fiscal revenue grew 16.3% in the first nine months from a year earlier to 16.4 trillion yuan, while fiscal spending rose 2.3% from a year earlier to 17.9 trillion yuan, Liu said. ($1 = 6.3982 Chinese yuan renminbi) (Reporting by Kevin Yao; Editing by Simon Cameron-Moore)



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FinMin announces repayment of oil bonds worth ₹5,000 cr

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The Finance Ministry has announced payment of ₹5,000 crore for oil bonds issued during 2005 and 2010 in lieu of selling oil product below the cost.

“The outstanding balance of ‘7.75% OMC GoI Special Bonds 2021’ is repayable at par on November 26, 2021,” the Ministry said in a statement. Further it mentioned that no interest will accrue thereon from the said date. In the event of a holiday being declared on repayment day by any State Government under the Negotiable Instruments Act, 1881, the loan/s will be repaid by the paying offices in that State on the previous working day.

Last month, the government paid ₹5,000 crore for another tranche of oil bond, taking total payout at ₹10,000 crore in the fiscal. After this, next tranche of ₹22,000 crore will be due in 2023. With this total principal amount pending would be over ₹1.20-lakh crore to be repaid between 2023 and 2026.

A mechanism of the regulated era, the bonds were issued to the oil companies for not increasing retail prices of petrol and diesel to reflect rising crude oil prices. The ‘under-recoveries’ of the oil companies due to their bearing the subsidy burden was converted into oil bonds by the then government. These bonds are interest-bearing, having a fixed coupon rate and paid on a half-yearly basis. The annual interest due of around ₹10,000 crore has been provided for in the Budget.

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Gold prices dip on rising dollar, bond yields, BFSI News, ET BFSI

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Gold prices eased on Tuesday, hurt by a stronger dollar and rising U.S. Treasury yields, while investors awaited more cues from Federal Reserve officials on the central bank’s monetary policy shift.

FUNDAMENTALS

* Spot gold fell 0.1% to $1,748.01 per ounce by 0115 GMT, while U.S. gold futures were down 0.3% to $1,747.50.

* The dollar index was up 0.1%, making gold more expensive for holders of other currencies.

* Overnight, benchmark 10-year U.S. Treasury yields rose to their highest level in three months.

* U.S. Federal Reserve officials on Monday tied reduction in the Fed’s monthly bond purchases to continued job growth, with a September employment report now a potential trigger for the central bank’s bond “taper.”

* Fed Chair Jerome Powell is due to testify later in the day before Congress on the central bank’s policy response to the pandemic.

* In prepared remarks, Powell said the U.S. central bank would move against unchecked inflation if needed.

* While gold is often considered a hedge against higher inflation, a rate hike would increase the opportunity cost of holding gold, which pays no interest.

* China’s central bank vowed to protect consumers exposed to the housing market on Monday and injected more cash into the banking system as the Shenzhen government began investigating the wealth management unit of ailing developer Evergrande.

* SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings fell 0.3% to 990.32 on Monday.

* Poland’s central bank has more than 230 tonnes of gold and plans to expand its reserves, the head of Poland’s Central Bank said on Monday.

* Silver fell 0.8% to $22.47 per ounce.

* Platinum dropped 0.5% to $976.07, while palladium was down 0.6% at $1,952.44.

DATA/EVENTS (GMT) 0130 China Industrial Profit YTD, YY Aug 1400 US Consumer Confid. Final Sept



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Bond market enjoys its Yhprum’s law moment

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The bond market is experiencing the corollary of Murphy’s law – called the Yhprum’s law – that states, “Everything that can work, will work.”

Just when market participants were beginning to worry about the absence of the G-SAP announcement last week, two things happened. First, the CPI inflation number at 5.3 per cent stood reasonably below the market expectations. Second, and a crucial factor, is the talk on Indian government securities’ inclusion in global bond indices.

Comments made by the Reserve Bank of India Deputy Governor Michael Patra assuaged markets regarding future monetary policy normalisation. “We don’t like tantrums; we like tepid and transparent transitions – glidepaths rather than crash landings,” said Patra.

Market participants believe that even if the economy starts to pick-up further and inflation continues to remain under control, any rate hike may still be far away. “The envisaged glidepath should take inflation down to 5.7 per cent or lower in 2021-22, to below 5 per cent in 2022-23 and closer to the target of 4 per cent by 2023-24,” Patra stated in his speech. Bond traders are of the view that with no upside shocks to inflation or the second half borrowing figure slotted to be announced later this month, there is no reason in the near term to discontinue the bullish stance. “If the second half borrowing figure comes in below or at the ₹5 lakh crore mark, it should be positive for the market,” a trader said.

On the cards

Steam picking-up on India’s inclusion in global bond indices is another crucial factor that could soften the yields further. Principal economic advisor Sanjeev Sanyal reportedly stated that preparatory work for the inclusion of certain G-secs in global bond indices is over and there could be some announcement pertaining to the matter this fiscal. The matter has been on the cards over the last few years.

Interestingly, so much has been talked about this matter over the last few years that at one point, bond traders simply began to ignore the sound bytes regarding any news on index inclusion. However, the conviction seems to be stronger this time and the same seems to be reflecting across the trading community.

Last week, the benchmark yield traded between 6.15 and 6.2 per cent. Bond traders say that in the absence of any major trigger in the immediate short term, the 10-year should continue to trade in the range of 6.1-6.2 per cent with a bias towards long positions.

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RBI’s communication key to handling excess liquidity, says StanChart’s Sahay, BFSI News, ET BFSI

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NEW DELHI: Over the last few weeks, a conundrum has resurfaced for the Reserve Bank of India — how to keep the liquidity surplus in the banking system from ballooning past a point that would be difficult to tackle in the future.

Standard Chartered Bank‘s head of economic research – South Asia, Anubhuti Sahay, is of the view that while it is important to permit a surplus of liquidity, it is equally important that “unnecessary excesses” are mopped off.

“I would suggest the following to the RBI Governor. The stock of liquidity if it becomes too large can become very difficult to absorb later on. Thus it is important that timely action is taken to ensure that liquidity remains in surplus, allows monetary policy transmission but unnecessary excesses are mopped off,” she said.

At present, liquidity in the banking system is estimated to be around 6 lakh crore rupees while the government is expected to be sitting on around 4 lakh crores, taking the core liquidity above 10 lakh crores.

Liquidity in the banking system in seen rising in the Jul-Sep quarter because of redemptions of Treasury Bills worth around 1.7 lakh crores, treasury officials said. In addition, the RBI is regularly infusing durable liquidity through its bond purchases under the recently announced ‘Government Securities Acqusition Programme’.

For the current quarter, the central bank has committed bond purchases worth 1.2 lakh crores.

From the perspective of its bond purchases there is little that the RBI can do because it is necessary for the central bank to be an active buyer of gilts and anchor sovereign borrowing costs at a time when the government borrowing programme is huge.

Moreover, the surplus liquidity conditions maintained by the RBI have had a significant role to play when it comes to keeping credit costs in the economy low at a time when the coronavirus crisis has crippled demand.

Sahay said that the RBI’s communication to markets would play a key factor in how the central bank manages episodes of a large accretion to liquidity.

In January 2021, markets were spooked when the RBI unexpectedly announced variable rate reverse repo operations as the step was taken as a precursor to policy normalisation.

At the time, the liquidity surplus was comparable to what it is now. The RBI has since, several times assured markets that it is not taking any steps to commence policy normalisation.

“It is important that measures are announced on a regular frequency while clarifying that these are not measures towards policy normalisation,” Sahay said.



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