Foreign institutional investors (FIIs) on Thursday scrambled to get their hands on corporate debt,paying higher premiums for limits auctioned.
While Rs 3,736 crore worth of corporate bonds that have no tenure restrictions were auctioned,FII bids totalled Rs 6,341 crore.
The cut-off premium paid on the limits,auctioned by the Securities and Exchange Board of India (Sebi) was 5.5 basis points whereas the highest premium paid by FIIs for such bond quotas in the past has been 4 basis points.
FIIs see profits in Indian paper after the Reserve Bank of India (RBI) cut the cash reserve ratio (CRR) by 25 bps on Monday to 4.5 per cent.
One-year corporate bond yields have fallen nearly 10 bps after the CRR cut and long-term corporate bond yields may ease once the CRR cut takes effect on September 22 and liquidity improves.
The governments move to open up foreign direct investment (FDI) in multi-brand retail,aviation and broadcast media and further measures expected to be announced for fiscal consolidation have improved the sentiment considerably. Since January,FIIs have bought $4.61 billion worth of debt,according to provisional data from Sebi.
Meanwhile,Sebi also auctioned Rs 23,488 crore of limits of gilts with tenures of five years and more on Thursday.
Limits in infrastructure bonds worth Rs 6,939 crore were also auctioned,which have a minimum tenure of 15 months and a lock-in for a year. The response from FIIs to these two categories was lukewarm.
Foreign investors who have fancied Indian debt for the last eight months,have grabbed more limits at the auction on expectations that the policymakers are finally getting their act together on reforms and growth. FE