Third time in a row, Power Finance Corporation (PFC) on December 23 have withdrawn their bond issuances after the investors demand higher yields on their bonds following a surge yields on government securities, according to market sources.
The company withdrew two bond issuances maturing in two-year-one-day and five years. Through both these bonds, the company had planned to raise Rs 3,000 crore each, including Rs 2,500 crore each as a greenshoe option.
According to market sources, PFC received multiple bids for its five-year bond issue across different coupon rates. Seven bids at a coupon rate of 7.07 percent with a cumulative value of Rs 3,475 crore, four bids at 7.09 percent with a cumulative value of Rs 3,675 crore and two bids at 7.10 percent with a cumulative value of Rs 3,784.92 crore. One bid at a coupon of 7.12 percent with a cumulative value of Rs 3,884.92 crore.
Further, the company received four bids at a coupon rate of 6.92 percent with a cumulative value of Rs 2,600 crore, six bids at 6.93 percent with a cumulative value of Rs 3,025 crore and four bids at 6.94 percent with a cumulative value of Rs 3,6,50 crore. Seven bids at a coupon of 6.95 percent with a cumulative value of Rs 4,125 crore.
Why investors demanding higher rate?
Money market experts said that the investors have started demanding higher rates in the last few weeks, firstly in anticipation of rate cut before the monetary policy, and later due to uptick in yields on government securities following dimming rate cut view post release of the RBI monetary policy committee (MPC) minutes.
Since the announcement of the monetary policy of December, the yield on the government securities have gone up cumulatively by 15-16 basis points (bps), including 6 bps after the announcement of minutes of RBI December policy.
This has triggered a higher demand for rates by the investors in the primary corporate bond market.
Currently, the 10-year benchmark bond yield is trading at 6.663 percent, as compared to 6.574 percent on December 18 – before the release of RBI minutes, and 6.494 percent on December 5, when the RBI delivered rate cut of 25 bps.
When was the last time PFC withdrawn bond issue?
Prior to this issue, PFC withdrew two bond issuances on December 9 of worth Rs 3,500 crore, maturing in 15 years, and November 26 of Rs 3,000 crore maturing in 3-year-4-month-17-day.
On December 9, Moneycontrol reported that PFC scrapped plans to issue bonds after investors demanded higher coupon rate, following an uptick in the government bond yields.
Further, on November 26, Moneycontrol reported that PFC have scrapped plans to issue bonds after investors demanded higher coupon rate, expecting a rate cut by the RBI in December.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
