Kumud Das Mumbai

Thesuccessful pricing of SBI’s perpetual bond, where the bank accepted Rs4,691 crore at a cut-off coupon of 7.75 per cent, and UltraTech Cement’s pro-posed Rs5,000 crore multi-tranche bond issue demonstrate that marquee issuers continue to enjoy strong investor confidence despite a challenging market envi-ronment.

However, these transactions should be viewed as exceptions rather than indicative of a broad-based revival in primary bond market activity, feel experts.

Bond issuances have remained relatively muted this month, with volumes lower than the previous month and only a handful of sizeable transactions reaching the market. Elevated yield volatility, triggered by geopolitical developments in West Asia and the uncertainty surrounding global crude oil prices, has made issuers in-creasingly cautious about locking in long-term borrowing costs.

Going forward, corporate bond issuances are likely to remain watchful until mar-ket conditions stabilise. Lower-rated corporates may increasingly prefer bank bor-rowings over capital market issuances, particularly when bond investors demand wider credit spreads during periods of volatility. At the other end of the spectrum, several large corporates have the flexibility to diversify their funding through overseas borrowings whenever pricing and hedging economics are favourable, reducing the immediate need to access the domestic bond market.

Talking to Bizz Buzz , Venkatakrishnan Srinivasan, Founder and Managing Part-ner, Rockfort Fincap, says: “Bank bond issuances may also remain selective in the near term. Strong mobilisation of FCNR(B) deposits under the RBI’s special swap window, together with access to foreign currency borrowings, has im-proved funding availability for many banks. In the current uncertain interest rate environment, some banks may also prefer shorter-tenor funding through Certifi-cates of Deposit (CDs) rather than committing to long-term bond issuances until yields become more stable. That said, banks requiring regulatory capital or long-term funding for infrastructure lending are still expected to access the bond mar-ket as and when opportunities arise.”

The market therefore remains distinctly bifurcated. High-quality issuers with strong balance sheets, established investor franchises and funding flexibility are likely to continue executing transactions successfully, while issuers with weaker credit profiles or limited pricing flexibility may prefer to defer capital market bor-rowings until volatility subsides.

The direction of the bond market over the coming weeks will largely depend on the evolution of geopolitical risks, crude oil prices, domestic bond yields and the RBI’s monetary policy guidance.

MV Hariharan, former treasury head, State Bank of India, said: “Reflects the at-tractive option of investing in SBI. Oversubscription by itself is a good indicator of the brand equity. In current realities, investors are looking for safe-haven as-sets and SBI represents stability with sovereign oversight and backing.” That said, if the issue size had been larger, more likely would’ve been the buzz and eyeballs looking for the advantages, he added. Definitely a benchmark for other aspirants. Also advertises domestic market resilience and appetite.