(Bloomberg) -- Borrowing costs for Indian companies spiked by the most in more than seven years last month, in a blow to firms struggling to recover from the pandemic.
The average yield on top-rated three-year, five-year and 10-year corporate rupee bonds all climbed by their most since 2013 in February. A confluence of factors including higher global bond yields, and concerns that companies may be crowded out of local debt markets by the government's near-record borrowings plans have pushed up borrowing costs up for Indian companies.
Investors worried about increased volatility and the ability of the Reserve Bank of India to tame rising yields amid an upswing in rates globally are sticking to shorter tenors. While India's economy returned to growth in the last three months of 2020, higher yields, rising oil prices and more infectious strains of Covid-19 all threaten the recovery.
“We are maintaining low or very low duration in credit market to hedge against volatility,” said Dwijendra Srivastava, chief investment officer for debt at Sundaram Asset Management Co. “Sharp increases in bond yields will hit the small companies the most that drive the Indian economy, and are needed the most at this time to help push growth.”
Yields on shorter-dated rupee corporate bonds have fallen somewhat this week as reflation concerns globally have receded, but they remain near an eight-month high.
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