The National Bank for Agriculture and Rural Development (Nabard) on Tuesday withdrew its bond issue after investors demanded a higher cut-off than the issuer was willing to accept, with market participants attributing the rise in yields to the large issue size. The company was planning to raise ₹8,000 crore through five-year bonds.
Bid book data showed the auction fell well short of its target. Across coupon levels ranging from 7.20 per cent to 7.60 per cent, the issue drew cumulative bids of about ₹7,166.5 crore across 112 bids, leaving a shortfall of roughly ₹833 crore even at the widest end of the pricing band.
Market participants said demand was thin at the lower coupons that Nabard would have preferred, with barely ₹1,126.5 crore bid up to the 7.43 per cent mark.
“Nabard’s decision to withdraw the issue appears commercially prudent given the sharp volatility in the bond market. As bond yields continued to reprice higher amid the escalating West Asia crisis, investors demanded higher yields for larger allocations, making full-book execution at the desired pricing difficult,” said Venkatakrishnan Srinivasan, founder and managing partner of Rockfort Fincap LLP.
“The market is also adopting a cautious stance ahead of the RBI’s monetary policy, with uncertainty around the policy commentary, liquidity outlook and interest rate trajectory. In the current environment, yield discovery is changing almost intraday, secondary market levels are highly volatile, and issuers face elevated execution risk. Waiting until after the policy decision and after geopolitical volatility subsides should allow issuers to return with better pricing visibility and lower funding costs,” he added.
business-standard