Corporate borrowing costs drop in 2 months

Mumbai: In the past two months, yields differential between the benchmark paper and corporate bonds contracted as much as 90 basis points, making borrowing cheaper — even for Tier-2 companies.

The differential or spread between three-year triple-A-rated bonds and similar-maturity government bonds narrowed to 36 bps versus 126 bps at the beginning of July, show Bloomberg data compiled by ETIG. The gauge contracted by 82 bps between double-A rated corporate papers and sovereign with three-year maturities. “The double-A rated companies may have gained the most in terms of borrowing costs as they could raise bonds at a significantly cheaper rate, particularly with three-year maturities,” said Ajay Manglunia, head of debt capital market at JM Financial.

“The liquidity stress has eased, particularly for NBFCs,” said Vikrant Narang, deputy CEO Ambit Finvest.