PSU bond issues hit pause as yields harden despite RBI rate cut

Subscribe to enjoy similar stories. MUMBAI : A growing disconnect between monetary policy signals and bond market pricing is forcing state-owned borrowers to step back from planned fundraisings.

On Monday, Indian Railway Finance Corp Ltd (IRFC) became the third public sector issuer—after Power Finance Corp (PFC) and Small Industries Development Bank of India (Sidbi)—to withdraw a bond issue within a week. IRFC withdrew its plans to raise up to ₹5,000 crore through zero-coupon bonds (ZCBs) as there was limited interest from investors to bid for tight pricing, three merchant bankers told Mint.

According to a bid book accessed by Mint, IRFC withdrew its up-to- ₹5,000-crore zero-coupon bond maturing in 10 years after it received bids worth over ₹4,461 crore in the range of 6.63-7.23%. The company had expected a coupon rate of around 6.8%, with the cut-off in the range of 7.23-7.25%.

This follows last week’s cancellations of PFC’s plan to raise up to ₹3,500 crore through 15-year bonds, and Sidbi’s plan to raise up to ₹8,000 crore through November 2029 bonds as they did not find the right pricing, the merchant bankers cited above said on condition of anonymity. Sidbi was expecting a coupon rate of around 6.8% for its short-term paper, but received bids closer to 6.9%, while PFC scrapped its issue after bids came in around 7.18%, well above its expectation of about 7.1%.

Market participants said the withdrawals reflect broader pressures building across the yield curve rather than issuer-specific concerns. “A combination of rupee depreciation, unresolved global uncertainties, muted foreign portfolio inflows and an unrelenting pipeline of long-tenor government borrowing kept pressure firmly on the yield curve," said