Rate hikes fuel demand for corporate bonds

Mumbai: Issuances of corporate bonds rose more than 16 per cent month-on-month in July to Rs 58,452 crore due to softening of yields on these instruments. Further rate hikes as guided by various central banks shall be data driven and more situational. That has kicked in demand for papers as investor appetite has improved.

According to the data from Prime database showed, banks and companies raised Rs58,452 crore in July, as against Rs 50,099 crore in June. Since the beginning of this calendar year, issuances remained highest in month of March, with companies raising Rs 81,580 crore.

Last week, the monetary policy committee of the central bank has hiked policy rate by 50 basis points to 5.40 per cent. This was the third consecutive rate hike by the central bank in this year after a 40 basis points hike in May and 50 basis points in June. With 50 basis points hike, the RBI has increased rate by 140 basis points since May this year. "Post RBI policy, the market turned hawkish due to 50 basis point repo hike. With expectations of calibrated liquidity withdrawal from the system, banks will have to compulsory increase their lending rates sharply. Issuers may now turn to corporate bonds issuances," said Venkatakrishnan Srinivasan, founder and managing partner at Rockfort Fincorp, a Mumbai-based debt advisory firm.