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Indian Issuers Visit Dollar Bond Market Before Modi’s 1st Budget

Bank of Baroda is marketing an addition to its existing U.S. dollar-denominated bonds as Indian borrowers come to the offshore markets ahead of Prime Minister Narendra Modi’s first budget on July 10.

The lender is offering more of its 4.875 percent debt due in 2019 at a premium of 215 basis points over U.S. Treasuries, according to a person familiar with the details, who asked not to be identified because the matter is private. A unit of Oil & Natural Gas Corp., India’s biggest energy explorer, sold $2.21 billion of notes in euros and dollars yesterday. That compares with an equivalent monthly average of $1.71 billion in offshore securities sold by Indian issuers in the first half.

Dollar borrowing costs for Indian issuers fell to a one-year low of 4.51 percent on May 30 after the Bharatiya Janata Party swept Indian polls with the biggest majority in 30 years, JPMorgan Chase & Co. indexes show. Yields averaged 4.65 percent on July 3 as the new administration prepares to present its first budget after vowing to restore India’s fiscal health.

“Issuers may be keen to lock in cheap funding ahead of Thursday’s Indian budget,” said Mark Reade, an analyst at Mizuho Securities Asia Ltd. in Hong Kong. “The budget could be a key determinant of how long the post-election feel-good effect lasts.”

Default Swaps Rise

Sumitomo Mitsui Banking Corp. is marketing benchmark three-year fixed-rate notes at 55 to 60 basis points more than Treasuries, five-year securities at a spread of 70 to 75 basis points and a 10-year bond at a 100 basis-point premium, another person said. The Japanese lender is also offering a three-year floating-rate note.

The cost of insuring corporate and sovereign bonds in the Asia-Pacific region advanced today, suggesting improved perceptions of creditworthiness.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan rose 1 basis point at 100.5 as of 8:22 a.m. in Singapore, Royal Bank of Scotland Group Plc prices show. The gauge is headed for its highest close since July 2, according to data provider CMA.

The Markit iTraxx Australia index increased by 1 basis point to 83.5 as of 10:28 a.m. in Sydney, National Australia Bank Ltd. prices show. The benchmark is also set for its highest close in almost a week, CMA data show. The Markit iTraxx Japan index climbed a quarter basis point to 63.25 as of 9:15 a.m. in Tokyo, according to Citigroup Inc. prices.

The indexes are benchmarks for insuring bonds against default and traders use them to speculate on credit quality.

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