NABARD Cancels ₹7,000 Crore Bond Issue Due to Investor Yield Demands
NABARD withdraws ₹7,000 crore bond issue amid demand for higher yields
Business Standard
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The National Bank for Agriculture and Rural Development (NABARD) has withdrawn its planned ₹7,000 crore bond issuance after receiving bids of only ₹3,000 crore, with investors demanding higher yields. This reflects a significant shift in the bond market, where even top-rated issuers face pressure for increased returns amid economic uncertainty.
- 01Only ₹3,030 crore in bids were received against a target of ₹7,000 crore for NABARD's bonds.
- 02Bids for NABARD's July 2029 bonds came in at a yield of 7.79%, below investor expectations.
- 03Market participants are increasingly favoring floating-rate bonds over fixed-rate options due to anticipated rate volatility.
- 04The bond market is experiencing flattening and inversion pressures, impacting investor strategies.
- 05Nabfid recently raised ₹4,000 crore through 10-year bonds at a yield of 7.74%, indicating market dynamics.
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The National Bank for Agriculture and Rural Development (NABARD) has withdrawn its planned bond reissuance of ₹7,000 crore due to insufficient investor interest, receiving only ₹3,030 crore in bids. Investors demanded yields higher than the offered 7.79% for NABARD's July 2029 bonds, highlighting a shift in the bond market dynamics. Recent trends show that issuers prefer shorter-tenor borrowings, driven by factors such as the ongoing West Asian crisis and daily yield volatility. Venkatakrishnan Srinivasan, founder of Rockfort Fincap LLP, noted that the withdrawal signals a broader market expectation of tighter funding conditions and persistent volatility, leading investors to seek higher returns even from AAA-rated issuers. Furthermore, the market has seen a surge in floating-rate bond issuances, with over ₹7,000 crore recently issued, indicating a preference for variable rates amidst uncertainty. In contrast, the National Bank for Financing Infrastructure and Development (Nabfid) successfully raised ₹4,000 crore through 10-year bonds at a yield of 7.74%, showcasing the contrasting strategies in the current bond market environment.
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The withdrawal of NABARD's bond issue may lead to higher borrowing costs for agricultural and rural development projects, as investors seek better returns.
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