Corporate bond issuances rise 8% to Rs 6.3 lakh crore till October this fiscal: SBI report

Corporate bond issuances grew 8 per cent year-on-year to Rs 6.3 lakh crore till October in the current financial year, up from Rs 5.8 lakh crore in the same period of FY25, according to an SBI Research report released on Sunday. The rise signals steady fundraising activity in debt markets as companies tap wider sources of capital amid stable macroeconomic conditions.

Commercial paper issuances also strengthened, rising 13 per cent to Rs 9.8 lakh crore, compared with Rs 8.6 lakh crore a year ago. Short-term instruments saw renewed interest through October as liquidity conditions shifted in favour of shorter maturities.

All scheduled commercial banks reported a 16 per cent year-on-year rise in credit during FY26 so far, with year-to-date credit growth standing at 6.3 per cent. On the deposit front, expansion remained slower, at 2.6 per cent year-on-year and 7.1 per cent year-to-date.

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Bank credit growth for the fortnight ended 31 October stood at 11.3 per cent, while deposit growth increased to 9.7 per cent from 9.5 per cent in the previous fortnight. The divergence between credit demand and deposit accretion continues to underline the need for agile liquidity management, the report noted.

Debt-Market-Trends: What is driving shifts in spreads?

The spread between the 10-year AAA-rated corporate bond and government securities has been narrowing since August. However, the spread for the 5-year segment widened in October, reflecting a mixed movement across tenors.

Short-term market dynamics also shifted. The gap between the Repo rate and the weighted average cost of commercial papers — negative in FY21 — expanded to 114 basis points in FY25 and eased to 90 basis points in October. Similarly, the spread between the Repo rate and 3-month certificates of deposit, which had risen to 83 basis points in FY25, now stands at about 45 basis points.

These movements reflect evolving liquidity preferences and varied pricing across the short-term and medium-term debt curves.

Liquidity flows favour short-term instruments

Mutual funds saw a sizeable infusion into short-tenure instruments in October, recording inflows of Rs 1.33 lakh crore. This came after a sharp outflow in September and muted movement in August, indicating that investor preference has swung back towards short-term avenues during the month.

The SBI report said foreign portfolio investors have remained cautious in emerging markets recently as volatility has affected capital flows. Despite this, several debt segments in India witnessed positive FPI inflows through most months, reflecting confidence in India’s macroeconomic stability and ongoing reforms.