Tax-Free Debt Returning 13% Lure Buyers After Rout: India Credit

Tax-free corporate bonds returning the equivalent of 13 percent are helping lure investors back as India’s debt market emerges from an unprecedented rout amid confidence in new central bank governor Raghuram Rajan.

Rural Electrification Corp. sold 10-year securities in late August at 8.01 percent, or about 180 basis points below regular notes. For buyers, the return is the same as that from taxable debt that pays 12.1 percent. National Housing Bank’s 15-year issuance offered the equivalent of a 12.8 percent yield. Both companies scrapped plans for conventional bond sales last month as borrowing costs surged amid a cash crunch created by the central bank to shore up the rupee.