Halister News

(Bloomberg) -- Room for spread compression between state and federal bonds remains limited as overall risk aversion and domestic demand-supply dynamics is more likely to benefit federal govt bond curve, Bansi Madhavani, analyst at India Ratings, says.

• Govt bonds have been outperforming their state counterparts recently as RBI’s OMO and buyback operations augmented interest in sovereign curve
• Sizable issuance of state loans along with special power restructuring bonds issued by states, have kept supply heavy while demand has not kept pace
• Net state loan issuance to date rose to 1.4t rupees compared to 1t same period last year; generic spreads on average 10- year state loans over govt bonds have already narrowed to 35-40bps compared to 60-65bps at the start of fiscal 2017
• NOTE: Nineteen states to sell 201b rupees of bonds on Oct. 25: RBI