India’s market interest rates have been rising very swiftly after the recent mid-cycle rate hike by the RBI. In our earlier analysis we had highlighted that bonds issued by the Central and State governments should now be your first choice as and when primary auctions crop up, as they offer the best combination of low risks with high yields currently.
About 10 days ago, we alerted you about the upcoming opportunities you will have in the bond market as we move up the rate cycle. Today, we are recommending 2 government securities (G-secs) that are out as auction in the RBI Retail Direct portal. You might want to check if your brokerage has the option to buy these.
Indian debt investors have been handed a raw deal in the last three years. Though inflation has been rising and market interest rates edging up, the Reserve Bank of India (RBI) and the Monetary Policy Committee (MPC) were doing their level-best to keep a lid on interest rates, to protect borrowers in a Covid-hit economy.
Here’s an explainer to demystify the barbells, ladders and roll-downs that are in vogue now. Right now, debt manager views are liberally sprinkled with terms that remind you of your morning workout.
Last week, we announced the beginning of our coverage of privately placed bonds. Today, we’re issuing the first of such calls. The private issuance of this unlisted bond was done on March 4, 2022 and it is now available as a secondary sale of privately placed bonds. Our report and recommendation here is on this secondary sale.
Private bond placements take place when a company wants to raise debt from the market, but doesn’t offer this to the investing public at large. Instead, the investment bankers offer such bonds to a private group of investors.
Beginning now, we will be issuing recommendations on opportunities arising in primary government bond issues to Growth subscribers. These recommendations will be both central govt bonds (called G-Secs) and state development loans (SDLs) and if opportunities are attractive – treasury bills as well.
SDLs are State government borrowings. Each State has a limit up to which it can borrow. The coupon that each bond carries depends on the State’s finances and of course, the prevailing interest rate cycle. SDL issues are managed by the Reserve Bank.
Long-standing warnings by market gurus about the imminent popping of the stock market bubble seemed to come good, with interest rates for US treasuries spiking up sharply and triggering a fairly sharp correction in stock prices across the world. But why should stocks fall if interest rates rise and will such a rate hike impact India?
Muthoot Fincorp, a non-deposit taking NBFC, registered with RBI, has come up with a public offering of secured non-convertible debentures (NCDs). The issue opens on January 5 and closes on January 28, 2022. Should you invest?
So what’s ahead for the prime debt outlook 2022? Do we expect rates to now sidle sideways or to continue their climb? Though the onset of Omicron may see the MPC continue to make dovish noises and delay repo rate hikes as much as it can, we think that market interest rates will continue to climb in 2022 irrespective of whether or not MPC acts.