FIIs bid $4.3 bn for G-sec, corp bonds

Mumbai: Foreign institutional investors (FIIs) put in bids for about $4.3 billion of Indian government securities and corporate bonds, or nearly double the stock on offer, indicating robust appetite for Indian debt, five market sources said on Wednesday.

Foreign investors bid for around 97 billion rupees ($2.1 billion) of corporate bonds against 27 billion rupees on sale, as the paper did not have any sector or tenor restrictions.

They bid 98 billion rupees of government bonds, compared with around 75 billion rupees on offer for maturities of more than 5 years.

The auction was held on Tuesday by the Securities Exchange Board of India (SEBI) to allocate unutilized FII limits for government bonds and corporate bonds.

Since the limits that were auctioned under the corporate bonds did not have any tenure restriction, they were lapped up by FIIs, but we can't be so optimistic when SEBI auctions the new limits which have restrictions, said a foreign bank dealer who had bid in the auction.

In the 2011/12 annual budget on Feb. 28, Finance Minister Pranab Mukherjee had raised the FII limit in bonds with residual maturity of more than five years issued by companies in the infrastructure sector by an additional $20 billion taking the limit to $25 billion.

This will raise the total limit available to FIIs for investment in corporate bonds to $40 billion.

The current FII limit in government debt stands at $10 billion of which $5 billion must be invested in bonds of more than 5 years maturity.

The commissions foreign investors were willing to pay for corporate bonds were sharply higher than for government bonds, indicating the strong demand.

These ranged from 1.05 to 1.4 percent on corporate bonds, compared with 0.04 to 0.055 percent on government bonds, the sources said.

($1=45.2 rupees)

Source: Financial Express