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Offshore debt of Indian lenders slump after Standard & Poor's downgraded IDBI Bank Ltd to below investment grade, citing weaker asset quality over the next 12-18 months.
Traders say IDBI downgrade is also sparking fears of a sovereign downgrade. However, S&P said earlier this month a review of India's ratings would come after general elections due by May 2014, although it could be conducted earlier if the country's fiscal or external standing deteriorate.
"The sovereign downgrade is obviously being discussed in the street even if it is not mentioned in the statement," says a Singapore-based trader.
The trader adds S&P downgrade is raising concerns about "a concerted wave of Indian downgrades," though he adds markets have always regarded IDBI among the weakest in terms of financial standing among state-run Indian lenders.
IDBI's 2019 bonds widen 30 bps to 415/385, according to traders, while 2018 bonds and 2016 bonds widen 40-45 bps each.
Other offshore debt of Indian lenders also take a hit. ICICI Bank's 2018 bonds and 2019 bonds widen by 5-10 bps, according to traders.
State Bank of India's 2018 bonds widen 10-12 bps wider to 285/275.