Money & Banking

Falling bond sales signal waning trust in NBFCs

Bloomberg June 27 | Updated on June 27, 2019 Published on June 27, 2019

Waning investor confidence in the country’s troubled shadow lenders is sapping demand for corporate debt.

Companies sold ₹1.2-lakh crore ($17.3 billion) of bonds so far in the April-June period — down 57 per cent from the previous quarter and the weakest since the year-ago period, according to data complied by Bloomberg. That is as average yields on top-rated three-year corporate debt have dropped 23 basis points to 7.74 per cent during the period.

Liquidity risk in the nation’s credit markets roared back this month after non-bank financier Dewan Housing Finance Corporation (DHFL) delayed bond interest payments, a sign of stress in the sector that has persisted since IL&FS Group defaulted last year. The crisis has hit demand for cars to appliances, bulk of which were financed by shadow banks, and contributed to the slowdown in the economy.

“There’s a crisis of confidence among investors,” said Rajeev Radhakrishnan, head of fixed income at SBI Funds Management. “A prolonged period of liquidity crisis, which if unresolved, can potentially lead to solvency issues. And the impact won’t be isolated to specific entities given the inter-linkages.”

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Published on June 27, 2019
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