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Informist, Friday, May 15, 2026

 

By Meera Nair and Nandini Sinha 

 

MUMBAI – National Bank for Agriculture and Rural Development withdrew the reissue of its 7.44%, Jul. 17, 2029 bonds on Friday after receiving bids for less than half the planned amount and at yields higher than it had expected, dealers said. This is the first bond issuance scrapped by a large state-owned entity in Apr-Mar (2026-27). 

 

"They (NABARD) were expecting bids somewhere around 7.70-7.75, but the entire quantum bids went up to 8%. So, they did not want to issue at those levels," a fund manager at mutual fund house said. "Also, a few investors were there, but at a price. Banks largely staying away due to tight liquidity, demand was limited to a few segment. So, it is all coming down on insurance and mutual funds. Mutual funds themselves, they do not have adequate flows these day, which was the broadly the reason for low demand." 

 

The state-owned entity had planned to raise INR 70 billion through the three-year bond reissue, with a base size of INR 20 billion and greenshoe option of INR 50 billion. According to the bid books accessed by Informist, it received 39 bids totalling 30.30 billion, with yields ranging from 7.62% to 8.04%. The base issue of INR 20 billion was getting subscribed at a yield of 7.79% and at a price of 99.05, while total bids were getting subscribed at 8.04%.

 

NABARD tapped the corporate debt market for the second time this financial year. On. Apr. 21, it had raised INR 42.50 billion through the reissue of the same 7.44%, July 2029 bond at a cut-off of 7.4892%, against a planned amount of INR 70 billion. According to market sources, INR 50 billion was subscribed at 7.48%, while the full amount was being subscribed at 7.53%.  

 

The highest yield demanded was 8.04%. "NABARD wanted to raise 7,000 crore rupees (INR 70 billion), but got bids worth just 3,000 crore rupees (INR 30 billion)...it shows the market is not very keen to invest at these levels and NABARD withdrawing shows the issuer is not comfortable borrowing at these levels," a dealer at a state-owned bank said.

 

Market participants had expected the cut-off at 7.70-7.75% till Thursday, before the hike in fuel prices. However, a dealer at a private bank said it was not a surprise as yields were higher Friday and investors were expecting a yield of 7.80% or higher at the auction. "There was very low demand for NABARD's 2029 paper as the prices were too high than the investors expected," a dealer at a private sector bank said. "The issuer was not happy with the rates that was asked for either. This is why they decided to withdraw the bond issuance."

 

Besides high pricing and weak demand, a rise in government bond yields Friday morning pushed corporate bond yields higher and led the bank to scrap the issuance, dealers said. The yield on the benchmark 6.48%, 2035 government bond ended at 7.06% Friday, up over 4 basis points from Thursday. Around opening hours, yields on government bonds were up due to an overnight rise in US treasury yields and Brent crude oil prices, dealers said. 

They said institutional investors such as the Employees' Provident Fund Organisation likely skipped the NABARD auction. Had they participated, the issue might have seen full subscription, but very few bids of INR 7 billion-INR 8 billion were placed. 

 

In the secondary market, NABARD's three-year bonds were traded at 7.80-7.85% Friday, up over 12 basis points from 7.68-7.72% Thursday. Five-year NABARD bonds were at 7.85-7.90%, up over 12 bps from 7.73-7.77%, while the indicative rate on 10-year NABARD bonds was 7.83-7.85%, up over 5 bps from 7.78-7.80%, dealers said. The yield on the benchmark 6.48%, 2035 government bond ended at 7.06% Friday, up over 4 bps from Thursday. Corporate bond yields ended sharply higher Friday, tracking a rise in crude oil prices and rates on certificates of deposit and commercial papers.

 

Dealers also said that NABARD has already been raising funds through the issuance of commercial papers. It raised around INR 57 billion through a three-month CP at 7.00% on Thursday, an official at the state-owned institution said. Dealers said NABARD would likely return with bond issuances of three- to five-year tenors once investor appetite improves. The issuer may wait for better levels or shift more to short-term debt instruments for now.  End

 

With inputs from Vaishali Tyagi and J. Navya Sruthi

Edited by Avishek Dutta

 

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