Buyers of corporate bonds appear to be putting their money in shorter-term three-year securities, given the coupon rates are more attractive than those for longer-term bonds. Power Finance Corporation (PFC), for instance, raised R2,350 crore on Thursday through private placement of non-convertible debentures (NCDs), of which R1,650 crore was raised in the three-year category at 9.11%, market players said.
The lender raised just R100 crore at 9.15% in the five-year category and R600 crore at 9.2% for a tenure of seven years.
“Three-year bonds are more liquid, but long-term investors, such as life insurance companies, find the seven-year paper more attractive,” said Ajay Manglunia, senior vice-president and head of fixed income at Edelweiss Securities.
“Given the flatness of the yield curve, it makes a very attractive investment over the next 8-12 quarters,” said Lakshmi Iyer, chief investment officer at Kotak Mahindra Asset Management Company.
Investors are also buying shorter-term non-convertible debentures. Shriram Transport Finance Company's public issue of NCDs was fully subscribed on the first day and raised R1,570 crore. Umesh Revankar, managing director of the firm that finances vehicle purchases, said at least 70% of the issue was subscribed in the three-year category.
“Even in public issues, the three- and five-year categories are popular as retail investors are looking for the best-possible yield in the shortest period of time,” he added. Shriram Transport’s issue offers a yield of 11% for three years and 11.25% on the five-year bond.