Latest news with #SDLs
Mint
17 hours ago
- Business
- Mint
Trading strategy to future outlook: LGT Wealth's Chirag Doshi points out four key things for Indian bond investors
India's fixed-income market is entering a defining phase. With inflation comfortably within the RBI's target band and growth on track, the current setup presents a compelling opportunity for investors to lock in attractive real yields with a prudent mix of quality and risk. Macro indicators continue to paint a favourable backdrop. Headline inflation has cooled to ~3%, GDP growth is tracking around 6.5%, and the Reserve Bank of India has front-loaded policy easing, cutting the repo rate by 100 bps so far in 2025 to 5.50%. A sharp reduction in the cash reserve ratio (CRR) has further eased systemic liquidity. While the RBI's stance has turned neutral, the overall tone remains accommodative. The government bond yield curve has flattened at the long end but remains steep in the 3- to 7-year segment. As of early July, the 5-year G-Sec trades near 6.00%, while the 10-year benchmark hovers around 6.30%. State Development Loans (SDLs), offering a 25–30 bps premium, remain attractive for incremental yield without compromising credit quality. We continue to find value in the 5–7-year part of the curve, where investors can capture both decent carry and roll-down potential. Long-duration positions are best approached selectively, especially considering global cues and potential domestic supply pressures. In the corporate bond market, shorter maturities (up to 5 years) dominate new issuance as issuers and investors both gravitate toward lower duration amidst falling rates. AAA-rated NBFCs and PSUs are raising capital at 6.60–6.80% for 5-year tenors—offering spreads of around 80–100 bps over corresponding G-Secs. For investors comfortable with slightly higher risk, selectively allocating to well-researched high-yielding credits in the A to A- category can meaningfully enhance portfolio carry. The key here is to remain cautious, focus on issuers with strong cash flows, seasoned promoters, and transparent governance, and avoid overexposure to any single name or sector. In this phase of the cycle, we recommend a laddered portfolio approach that combines duration and credit quality thoughtfully. The objective should be to build a robust carry while maintaining resilience against unexpected macro shifts. Liquidity sleeve (0–1 year): Deploy into liquid and ultra-short funds or short G-Secs for parking and capital preservation. Core carry (3–7 years): Focus on 5–7-year G-Secs and AAA-rated corporates to optimize yield and manage duration risk. Yield enhancement (2–4 years): Add select high-yielding A/A- rated bonds in moderation for portfolio lift, with strict attention to credit selection and size limits. The RBI's August policy review, which could provide clarity on the pace and extent of further easing. Inflation trajectory, particularly in food prices post-monsoon. Global rate trends and commodity prices, especially crude oil. Government borrowing calendar and potential changes to the fiscal glide path. Any of these factors could influence bond yields, particularly at the long end of the curve. With policy easing largely behind us and inflation under control, fixed income investors are well-placed to lock in real returns that look increasingly attractive on a risk-adjusted basis. The opportunity is not about chasing yield, but about building carry, layering quality, and being intentional with credit. At this juncture, prudently structured portfolios—anchored in core quality, with calibrated exposure to high-yielding credits—can deliver consistent performance through the cycle. The bond market, in short, is offering a window worth stepping into—cautiously, but confidently. The author, Chirag Doshi, is the CIO at LGT Wealth India. Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
The Hindu
4 days ago
- Business
- The Hindu
Telangana treading cautiously on market borrowings; it raised ₹17,400 crore in first quarter
Telangana Government appears to be treading cautiously in its market borrowings. It has proposed to raise ₹11,000 crore market borrowings during the July-September quarter of the current financial year [2025-26]. This is much lower compared to ₹17,400 crore raised during the April-June [first] quarter primarily to be used to credit assured amounts into the accounts of farmers under Rythu Bharosa — the farmers' investment support scheme. What are market borrowings? Market borrowings by State Governments refer to the funds that State governments raise by selling securities, primarily State Development Loans (SDLs), to investors in the market. Securities are assurances given by State government. The State government proposes to raise ₹4,500 crore in four tranches in July, participating in all but one auction of securities to be conducted by the Reserve Bank of India (RBI). It has raised ₹1,500 crore during the auction conducted on July 1 and plans to raise ₹3,000 crore in three instalments during the auctions to be held on July 15, 22 and 29. Similarly, the government indicated that it would raise ₹3,500 crore in three auctions during August and balance ₹3,000 crore in three more auctions during September taking the total borrowings to ₹11,000 crore for the quarter, according to the provisional figures in the indicative calendar of borrowings released by the RBI for the second quarter. Why are market borrowings raised? This is a key method for States to finance their fiscal deficits and fund various developmental activities. State Development Loans are now categorised as State Government Securities. A steep reduction in the borrowing limit by the Union Finance Ministry is said to be another reason for the State government to tread cautiously. The government had proposed to raise over ₹69,539 crore through borrowings, including open market borrowings of ₹64,539 crore during the current fiscal in the budget estimates. But the quantum had, however, been reduced steeply to ₹54,009 crore as could be seen from the provisional figures in the key indicators released by the Comptroller and Auditor General of India in the first two months forcing the Government to restructure its open market loans to meet the requirements. What are consolidated sinking and guarantee redemption fund? State governments have to deposit a certain amount with Reserve Bank of India under the consolidated sinking fund and guarantee redemption fund mandatorily. If a State government defaults on the loan payments, money is deducted from these funds. Expenditure on interest payment in two months While the cut in borrowing limit had come as a setback, the State Government is facing a tough task in the form of interest payments. The government had incurred ₹4,166 crore towards interest payment by May end, spending 21.51% of the ₹19,639 crore projected for the year in just two months.
Time of India
26-06-2025
- Business
- Time of India
Andhra Pradesh lacks fiscal discipline, picks debts through NCDs at higher interest rate: Ex-CM YS Jagan Mohan Reddy
VIJAYAWADA: Former chief minister and YSRCP supremo YS Jagan Mohan Reddy has charged that the state government's lack of fiscal discipline and disregard for the constitutional framework has pushed the state into big trouble. He said that the APMDC NCDs (bonds) were issued at a coupon (interest) rate as high as 9.30%, which is 2.60% higher than the prevailing SDL rate. In a social media post tagging union finance minister Nirmala Sitaraman and other PMO, Jagan Mohan Reddy alleged that they have learnt that APMDC concluded the second tranche of its NCD (bond) issuance at a coupon (interest) rate of 9.30% and raised Rs. 5,526 crores, taking the aggregate value of the issuance to Rs. 9,000 crores on Wednesday (June, 25). 'The govt went ahead with the issuance of NCDs despite the matter being admitted by the AP High Court and notices served. It is quite apparent that the proceeds of the issuance would be utilized for financing government revenue expenditure,' said Jagan. He explained that the TDP alliance government, granted private parties access to the consolidated fund of the state through RBI direct debit mandate, owing to which, private parties can access the state exchequer and withdraw funds without any requirement of any action from the state government officials. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Perdagangkan CFD Emas dengan Broker Tepercaya IC Markets Mendaftar Undo He said that it was a blatant violation of articles, 203, 204 and 293(1) of the Constitution of India. In a manner unheard of, the govt also mortgaged mineral wealth worth Rs. 1,91,000 crores for NCD (bond) issuances of aggregate value Rs. 9,000 crores. He said that with permission to access state consolidated fund and mortgage of govt property of disproportionately huge value, one would imagine that these bonds are even more secure than the SDLs (State Development Loans) issued by the state government. He alleged that the additional yearly burden on the APMDC is to the tune of Rs. 235 crores, owing to the high interest rate and the term of NCDs is understood to be 10 years. With NCD issuance, the total budget and off-budget borrowings availed and secured in this 13-month period by the TDP alliance govt exceeded 50% of what was borrowed by previous govt over a 5-year period.
Hindustan Times
26-06-2025
- Business
- Hindustan Times
Andhra govt lacks fiscal discipline, says Jagan
Amaravati, Former Andhra Pradesh Chief Minister Y S Jagan Mohan Reddy on Thursday accused the TDP-led NDA government of lacking fiscal discipline and exceeding 50 per cent of the borrowings incurred by the previous YSRCP regime in just 13 months. Andhra govt lacks fiscal discipline, says Jagan Reddy said that the Andhra Pradesh Mineral Development Corporation concluded the second tranche of its NCD issuance at a coupon rate of 9.3 per cent on June 25 to raise ₹ 5,526 crore, taking the aggregate value of the issuance to ₹ 9,000 crore. "With this NCD issuance, the total budget and off-budget borrowings availed and secured in this 13-month period by the TDP alliance government exceeded 50 per cent of what was borrowed by previous government over a 5 year period," said Reddy in a post on 'X'. Alleging that the N Chandrababu Naidu-led government disregards constitutional framework, the YSRCP supremo said MDC went for the second tranche of its NCD issuance despite this matter being admitted in the Andhra Pradesh High Court and notices served over it. "Further, it is quite apparent that the proceeds of the issuance would be utilised for financing government revenue expenditure," he said. "With total disregard to the constitutional provisions and in an unprecedented manner," Reddy alleged that the NDA alliance government granted private parties access to the consolidated fund of the state through RBI direct debit mandate. Owing to this arrangement, the opposition leader claimed that private parties "can access the state exchequer and withdraw funds without any requirement of any action from the state government officials." According to Reddy, this is a blatant violation of Articles 203, 204 and 293 of the Constitution of India. Further, he said the southern state has also mortgaged mineral wealth, which is government property, worth ₹ 1.91 lakh crore for the NCD issuances of aggregate value ₹ 9,000 crore as additional security, terming it "unheard of". "With such permission to access the state consolidated fund and mortgaging of government property of disproportionately huge value," Reddy said one would imagine that these bonds are even more secure than the SDLs issued by the state government. Further, he alleged that the MDC NCDs were issued at a coupon rate as high as 9.3 per cent, which is "2.60 per cent higher than the prevailing SDL rate". Reddy alleged that due to the high interest rate, the additional yearly burden on MDC is to the tune of ₹ 235 crore and the term of NCDs is understood to be 10 years. "Can Naidu Garu answer as to who pocketed this?" asked Reddy. Meanwhile, there was no immediate reaction from the TDP. This article was generated from an automated news agency feed without modifications to text.
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Business Standard
17-06-2025
- Business
- Business Standard
SDL-based STRIPS: Use for duration matching, not for tactical gains
Invest for more than 12 months to enjoy favourable tax treatment Listen to This Article Starting June 12, the Reserve Bank of India (RBI) has permitted the use of the separate trading of registered interest and principal of securities (STRIPS) mechanism for State Development Loans (SDLs). It was earlier allowed for central government securities (G-Secs). 'This will enhance price discovery, deepen liquidity, and pave the way for a transparent zero-coupon yield curve in state debt,' says Vishal Goenka, cofounder, Understanding STRIPS STRIPS involve breaking a standard bond — comprising regular interest (coupon) payments and a final principal repayment — into individual zero-coupon instruments. 'These zero-coupon government securities do not pay periodic interest, but are sold at
