Rising interest rate roils debt markets in H1: Report

Source: The Hitavada      Date: 09 Nov 2018 09:33:44


Business Bureau,

RISING interest rate has seen a 26 per cent de-growth in fresh corporate bond issuances at Rs 2.5 trillion in the first half of FY19 from a high Rs 3.4 trillion in the year-ago period, and may remain subdued in the remaining part of the year as well, says a report.
With such a de-growth, the volume of bond outstanding stood at low Rs 28.4 crore at the end of September, recording a growth of 9.7 percent as against 14 percent in March 2018, says domestic rating agency Icra in a report.

However, a shift in credit demand to banks and a low base effect resulted in a 12.6 percent growth in bank credit as
of September. Call money rates have been on an upwsing for a while and is trading at 9.5 per cent and above. But as investors shifted to short-term debt instruments, outstanding volume of commercial papers rose to Rs 5.5 trillion as of September 30, clipping at 41.5 percent, says Icra.

Karthik Srinivasan, group head for financial sector rating at the agency warned that the increased risk aversion towards non-banking finance companies (NBFCs) and housing finance companies (HFCs), bond and commercial paper sale is likely to moderate in the second half (H2) of the financial year 2019 as well, pushing these shadow banking entities to scale down their credit growth.”