Top Corporate Bond Arranger Expects Spreads On Highest-rated Notes To Widen
"We think the RBI will guide liquidity toward more normal settings, which could lead to spreads widening on corporate bonds," ICICI Bank's top official said
Topics
corporate bonds | ICICI Bank
ICICI Bank
ICICI Bank Ltd., one of India’s top corporate bond arrangers, expects spreads on the highest-rated local notes to widen further as the central bank begins to withdraw emergency liquidity.
The extra yield investors demand to hold AAA rated company notes due in one year over comparable government securities jumped to the highest since October last week and remains near that level. That came after the Reserve Bank of India on Jan. 8 announced plans to drain excess cash from markets.
Easy liquidity and record-low borrowing costs have been a crucial lifeline helping many companies make it through the financial fallout from the pandemic. But as economic data suggest India will bounce back strongly this year, authorities may need to pare stimulus further ahead. India isn’t alone in draining excess cash. China’s central bank is also taking steps to constrain excessive liquidity.
“We think the RBI will guide liquidity toward more normal settings, which could lead to spreads widening on corporate bonds,” B. Prasanna, ICICI Bank’s group head of global markets, sales, trading and research said in an email interview.
Yields on shorter bonds surged earlier this month after the Reserve Bank of India said it would withdraw 2 trillion rupees ($27.4 billion) via a 14-day reverse repo auction on January 15.
Dear Reader,
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.
Digital Editor
First Published: Fri, January 29 2021. 08:40 IST
The Battle For Depositors: US Lenders Ramp Up Efforts Amidst Rate Uncertainty
In the competitive landscape of the US banking sector, retaining depositors is paramount for lenders seeking to maintain... Read more
Beyond Capital: Unveiling The Complexities Of Bank Failure Prediction
In the realm of banking, the ability to predict and prevent failures is paramount for financial stability and consumer c... Read more
Central Banks And The Economic Horizon: Steering Through Uncertaintie
In the evolving landscape of global financial markets, the strategic role of central banks has come under intense scruti... Read more
Transforming Financial Operations With Robotic Process Automation
Author: Ricardo Goulart ... Read more
The Role Of Machine Learning In Fraud Detection
Author: Gerardine Lucero  ... Read more
Principles Of Islamic Banking And Finance
When it comes to banking, a significant new contender has entered the ring. The principles of Islamic banking and financ... Read more