Power Grid Corporation (PGC) of India is back in the bond market as the state-owned electric utilities company has raised about Rs 3,000 crore by selling bonds for the first time in the fiscal year 2015-16 with banks interested in buying those bonds. 

The triple-A rated company decided to raise funds following softening of the benchmark rate with banks jumping to buy bonds. India's largest lender State Bank of India (SBI) was quick to bet big on the blue-chip securities with four 15-year strip maturities, while the country's third largest private sector lender Axis Bank also bought bonds worth as much as Rs 500 crore. 

SBI is said to have bought Rs 564 crore through its arm SBI Capital Markets, three people familiar with the matter told the Economic Times. Bonds offered 8.40%, which was about 55 basis points higher than the sovereign benchmark security.

A basis point is one hundredth of a percentage point. Strip bonds are those where investors are supposed to buy all securities with maturities up to 15 years at a uniform rate. Ahead of the Reserve Bank of India's June bi-monthly credit policy, markets are mostly expecting a 25-50 bps rate cut, which means bond yields would fall further pushing up prices. Banks can then sell their holdings in the secondary market for a profit, said one of the persons cited above. 

There were about 18 arrangers for the PGC issue. During mid-May, the 10-year benchmark bond yields rose to a high of 7.96% as prices fell. Accordingly, bond sellers shied away from the market as investors demanded higher rates after the yield spiked from 7.68% earlier in March. The benchmark yield is now hovering at its past level.

PGC had last issued long-term bonds three months ago raising Rs 435 crore at an yield of 8.30%. Some frequent issuers include Exim Bank, Power Finance Corporation and Rural Electrification Corporation. They normally raise funds with ticket size as low as Rs 150 crore or as high as Rs 2,500 crore. All these government-owned companies are triple-A rated entities. 

Steel Authority of India ( SAIL) and GIC Housing Finance had deferred their bond offerings as investors demanded at least 25-30 basis points higher rates with five-year maturities.

(This news story is from Business Insider India)