Global institutions, including a World Bank arm, have issued bonds worth $1.4 bn so farin 2024
NIMESH VORA
Mumbai, February 21
THE WORLD BANK'S lending arm
and other global institutions have
issued $1.4 billion worth of offshore rupee-denominated bonds so
far this year to meet strong demand
spurred by India's inclusion in JP
Morgan's emerging market debt
index, two banking sources said.
The bond issuance since January
is almost half of $3.3 billion issued
in all of 202 3,said the sources, who
actively trade these supranational
bonds and base their tally on data
from several financial institutions.
Most of last year's issuance was
in the fourth quarter, the sources
said, when foreign investors piled
into rupee debt after JP Morgan
said India will be part of the Emerging Market Bond Index (EMBI)
from June 2024.
These offshore bonds, with
maturities ranging from four years
to 10 years, are denominated in
Indian rupee but settled in US do lar, the sources said.
The bond yields are usually
lower than Indian government
bonds. They allow issuers to raise
US funds at cheaper rates while giving overseas investors access to
rupee debt without having to geta
special licence to operate onshore
or pay local taxes, investment
bankers said.
“The fact that you may just have
some investors that don't want to go
through the registration process.
They may just continue to use the
supra market, and to be honest, the
supra market is growing quite
quickly,” Singapore-based Kenneth
A kinte we, head of Asian sovereign
debt at a brdn, said, adding that
global investor sare“ generall yover weight” on Indiarisk.
Mitul Kotecha, head of currency
and emerging market macro stratY] E‘L| cafdfl
M Yields on these
bonds are usually
lower than Indian
government bonds
D
egy for Asia at Barclays, said the
issuance of rupee bonds offshore
has picked up following the JP Morgan in clusion, adding that they were
a “straightforward channel” for
investors wanting to own debt with out having to set up local arrangements.
The World Bank's lending arm,
International Bank for Reconstruction & Development (IBRD), has
issued several bonds so far, in cludinga 6-year bond issued this month
at a yield of 6.89%, lower the
onshore sovereign yield of 7.06%.
Other supranationals, all of
them 'AAA' rated, including the
European Bank for Reconstruction
& Development, Inter-American
Development Bank and the Asian
Infrastructure Investment Bank,
have also issued rupee bonds. JP
Morgan, Goldman Sachs, Standard Chartered Bank and HSBC were
among the arrangers, bankers said.
Issuers typically convert the
rupee bond proceeds into US dollars
to finance global projects. The high
demand for rupee debt means dollar funds are 15-25 basis points
cheaper than prevailing US rates.
“The appeal for issuers is that they shave off a few basis points of the dollar cost and that it provides
them access to a wider set of investors,” a managing director for emerging market sat Britain-headquartered bank said.
Long-only traditional asset
managers pick up around three fourth so the total is sued a mounts,
with the rest being absorbed by short-term investors looking to front-run passive investment
inflows that index inclusion will spur, the banker side.
REUTERS
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