Mortgage lender Housing Development Finance Corp raised Rs5 billion ($110 million) on Wednesday through a zero-coupon bond issue, two sources familiar with the transaction said.
The issue offers an effective annualised yield of 6.6%, one of the sources, who did not wish to be named, said.
In comparison, the annualised yield on one-year zero coupon curve was at 5.19% on Wednesday. The yield curve is derived from Reuters Indian government bond benchmark rates.
"The issue has got sold out," another source said, within hours of opening.
Foreign institutional investors (FIIs) have been buying short-term zero coupon Indian debt because of relatively higher returns, merchant bankers said.
"It's all FII demand because on a fully-hedged basis, it's an attractive carry for them," said Nirav Dalal, head of debt capital markets at Yes Bank.
The HDFC bonds mature on May 6, 2011 and are rated AAA by agencies CRISIL and ICRA. Deutsche Bank was the sole arranger to the issue.
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