CURRENT AFFAIRS : BANKING & FINANCE
SBI Expands Dollar Bond Issue to $1 Billion in Response to Declining US Yields
- The State Bank of India (SBI) has increased its dollar bond issue size to $1 billion from $750 million, with plans to secure the funds in the first week of December.
- SBI is making its second foray into international markets this financial year, with $750 million underwritten by global banks and an additional $250 million available through a green shoe option arranged by banks such as HSBC and JP Morgan.
- The bonds issued by SBI will be benchmarked against 5-year US Treasury bonds, likely priced at a spread of approximately 120 basis points above the benchmark, with a tenor of 5 years.
- Taking advantage of the recent decline in US bond yields, SBI’s move coincides with expectations of the Federal Reserve signalling an end to its monetary tightening cycle.
Key Highlights :
- The 5-year US Treasury rate is currently at 4.55%, providing context for SBI’s pricing strategy.
- These funds are being raised under SBI’s $10-billion medium-term note programme.
- The proceeds will be used for various purposes, including lending, and refinancing existing overseas debt.
- SBI currently has $800 million worth of instruments maturing in early 2024.
- Also, Canara Bank raised $500 million from the overseas market, with HSBC as the lead arranger and bookrunner.
- This loan comprised two facilities, a $200 million tranche with a tenor of three years and a $300 million tranche with a tenor of three years.
- The borrowing was offered at a rate of 125 basis points over the secured overnight financing rate (SOFR).
