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Mumbai: International bond markets, which saw a drying up of Indian issuances last year, have opened up in a big way for emerging markets like India. Global fund managers are making fresh allocations to bonds, and issuers are also looking overseas as rates firm up locally.
“Offshore bond markets were subdued last year as local markets took time to catch up with the rising global rates, and there was an arbitrage opportunity in raising funds locally. The dynamics are changing again with offshore markets offering a good alternative for large-scale fund-raising,” said Bhavik Pandya, head of south and southeast Asia debt capital markets at Bank of America
This week, Exim Bank closed a $1-billion sustainable bond issue, with a yield lower than those offered on bonds with a comparative rating. For investment bankers, 2023 has started on a strong note. “The first half of January saw $7 billion being raised by three sovereign or sovereign-linked issuances from Indonesia, Philippines and India and we can expect to see a number of issuances from these markets in the coming months,” said Pandya.
Unlike the past when international markets offered a price advantage, the new attraction for issuers is the appetite for large offerings and for long maturity. “Offshore markets continue to offer the deepest liquidity, widest high-quality investor base, long tenors and large sizes to issuers, which presents a combination that domestic markets cannot match,” said Pandya.
He said the market is ripe for issuers given the amount of funds chasing debt. “Issuers are also front-loading issuances to take advantage of the current tight credit spreads, which may see some widening in the face of a possibility of global recession,” he said.
Most economists are expecting bond yields to slide in the next financial year. According to RBI’s survey of professional forecasters, the 10-year bond yield is expected to be around 7.4% in FY23 and dip to 7.2%. From the investors point of view, yields this year are as good as it gets given that the world economy is expected to slow down.
“Offshore bond markets were subdued last year as local markets took time to catch up with the rising global rates, and there was an arbitrage opportunity in raising funds locally. The dynamics are changing again with offshore markets offering a good alternative for large-scale fund-raising,” said Bhavik Pandya, head of south and southeast Asia debt capital markets at Bank of America
This week, Exim Bank closed a $1-billion sustainable bond issue, with a yield lower than those offered on bonds with a comparative rating. For investment bankers, 2023 has started on a strong note. “The first half of January saw $7 billion being raised by three sovereign or sovereign-linked issuances from Indonesia, Philippines and India and we can expect to see a number of issuances from these markets in the coming months,” said Pandya.
Unlike the past when international markets offered a price advantage, the new attraction for issuers is the appetite for large offerings and for long maturity. “Offshore markets continue to offer the deepest liquidity, widest high-quality investor base, long tenors and large sizes to issuers, which presents a combination that domestic markets cannot match,” said Pandya.
He said the market is ripe for issuers given the amount of funds chasing debt. “Issuers are also front-loading issuances to take advantage of the current tight credit spreads, which may see some widening in the face of a possibility of global recession,” he said.
Most economists are expecting bond yields to slide in the next financial year. According to RBI’s survey of professional forecasters, the 10-year bond yield is expected to be around 7.4% in FY23 and dip to 7.2%. From the investors point of view, yields this year are as good as it gets given that the world economy is expected to slow down.
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