SBI Bonds listed at 5 percent premium

SBI Bonds listed at 5 percent premium

The SBI which entered the market last month with bonds at interest rates of 9.25 percent for 10 years and 9.5 percent for 15 years have been listed at a premium of 5 percent, which in other words mean those who buy now will get yields of less than 9 percent taking the premium over issue price. SBI Bonds was oversubscribed by 17 times While launching the bonds O.P.Bhatt Chairman of SBI said that the “the bank decided to offer an attractive return on its bonds because it planned to create a retail market for its long-term bonds, which it would sell every quarter. “. The Bond sale was like an IPO offer from Government stable as a 5 percent listing for one lakh worth bonds would give a return of 5000 in a month’s time which is very attractive to retail customers.

High net worth individuals who bought bonds aimed at emerging opportunity and do not have the intention of locking up the bonds for 10 or 15 years
According to leading Merchant bankers “investors are getting an opportunity to exit because there was a lot of institutional demand for the bonds during the public offering, which was oversubscribed over 17 times. This ensured there were buyers in the secondary market. Some bond houses are also buying at 8.8% since there are many provident funds that are willing to invest in an SBI bond at a yield of 8.75%, which leaves a decent margin.”

Further, according to a merchant banker “SBI can afford to provide a higher return on its bonds in a rising interest rate situation since the resources raised can be deployed at a higher yield. Also determining the coupon the bank would have found it necessary to offer a return higher than its three-year fixed deposits which are also reasonably liquid. An attractive pricing also gives the bank an opportunity to build new relationships,” said the head of corporate debt with an investment bank.

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