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Surprise demand for Indian AT1 

August 4, 2014
Manju Dalal, IFR Asia

Bank of India is on course to raise at least Rs29bn (US$476m) from its debut offering of Basel-III compliant Additional Tier 1 securities, more than double its initial target, after a surprisingly strong response from investors.

A yield of 11% on securities with a Triple A rating from local agency Brickworks helped attract a wide range of investors, helping create a deeper-than-expected local market for Indian bank capital securities.

“In a falling interest-rate environment, who wants to miss the chance of holding double-digit yielding Triple A rated 10-year paper from a state-owned lender?” asked a banker on the deal.

However, the overwhelming response to the perpetual non-call 10-year bond raised questions over how well investors understand the loss-absorption features of these securities. 

Read more: IFR Asia

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