Bond yield rises as funds turn cautious

KOLKATA: REC, formerly known as Rural Electrification Corp, is said to have raised Rs 1,245 crore in bonds Friday at a much higher rate, reflecting tighter liquidity and lower investor appetite, bond traders said.

The REC sold its "AAA" rated bonds carrying 2 year 7 month maturity at 8.5 per cent, which is 15-20 basis points higher than the prevailing rate for bonds with best credit ratings.

"The higher rate is due to a combination of tighter liquidity and high frequency of REC's fund raising," a trader said. REC has always been very active in the bond market for mobilising capital.


Short-term borrowing rates have inched up in general in the last few days on concerns over rating downgrades at two Anil Dhirubhai Ambani Group companies, Reliance Home Finance and Reliance Commercial Finance.

However, the recent decline in oil prices from near-term peaks is positive for the market. "The near-term outlook is now neutral to positive," said Mahendra Kumar Jajoo, head of fixed income at Mirae Asset Global Investments (India).