Get 40% Off
⚠ Earnings Alert! Which stocks are poised to surge?
See the stocks on our ProPicks radar. These strategies gained 19.7% year-to-date.
Unlock full list

Reopening Economy Drives India Bond Rebound Despite Moody’s Cut

Published 05/06/2020, 03:57
Updated 05/06/2020, 05:27
© Reuters.

(Bloomberg) -- Private-sector Indian companies have fared well in the bond market this week despite a sovereign rating downgrade by Moody’s Investors Service, as investors focus more on early signs of some improvement in the economy.

Spreads on the firms’ U.S. currency notes dropped 5.7 basis points compared with last week, according to DBS Bank Ltd. data, even after Moody’s cut India’s rating to the lowest investment grade with a negative outlook on Monday.

There have been some signs of nascent economic recovery as India begins to ease the world’s most stringent restrictions. After 122 million people lost their jobs as a result of a nationwide lockdown, the total number of people employed increased by 21 million in May even before the gradual lifting of the restrictions, according to Center for Monitoring Indian Economy Pvt. data released this week. Services sector activity in the nation also picked up slightly last month, data showed Wednesday.

“For now, markets could look past India’s rating downgrade,” Chang Wei Liang, a macro strategist at DBS Bank, said in a note.

The muted reaction to Moody’s sovereign downgrade on dollar-denominated papers comes amid a global rally in risk assets with the premiums on investment-grade bonds declining across Asia.

Still, despite the early signs of improvement, the challenges India faces remain stark, after its lockdown resulted in record low economic activity and fueled the biggest earnings decline in at least six years.

And state-owned Indian firms’ dollar debt didn’t hold up quite as well after Moody’s also took negative actions including one-level rating cuts and changes in outlook against a swathe of government-backed firms. Spreads on their securities widened slightly after the cut, according to DBS Bank.

©2020 Bloomberg L.P.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.