INSUBCONTINENT EXCLUSIVE:
By Anurag JoshiThe sell-off in global risk assets sparked by the coronavirus pandemic along with India’s biggest bank bailout are making
bond investors wary and stomping out early signs of a turnaround in the country’s credit crisis.
The pain looks set to worsen Thursday
Stresses deepened after India suspended most visas and President Donald Trump halted travel from Europe while stopping short of offering a
India’s credit markets had already been on edge since authorities seized Yes Bank Ltd
last week, marking the biggest bank failure in the nation’s history.
As investors in India shun riskier credits, borrowing costs for the
most vulnerable firms are surging, fueling concern about their ability to roll over debt
The proportion of local rupee bond issuance with ratings lower than AA+ is again around the lowest since 2005.
That all comes at a bad time
The nation’s economy is slowing as the fallout from the virus’s global spread worsens, threatening to scuttle a nascecnt recovery in a
shadow bank crisis sparked by the shock stumble of IL-FS Group in late 2018.
The crisis has cut a key funding source for many smaller
companies that had depended on shadow lenders for loans
Now, as debts come due at these lower-rated firms, the ones that can will try to roll over those obligations in the bond market instead, but
they’ll need to pay a lot more for those funds.
The spread between yields on 10-year rupee BBB notes and similar-maturity AAA rated bonds
has widened to the most in more than a decade.
BloombergTo make matters worse, credit metrics for domestic firms are deteriorating at a
faster pace this year than last
There have been about three downgrades for each upgrade year-to-date
It was only about two to one in 2019, according to data compiled by Bloomberg on the rating moves by the nation’s four biggest credit
