Indian corporate CDS widening

From a recent Bloomberg report,

Average bond risk for Indian borrowers more than doubled in the past year as Asia’s third-largest economy expanded at the slowest pace since 2009 and the central bank lifted interest rates seven times to slow inflation. Five-year bond yields for AAA-rated companies have jumped 43 basis points since October to 103 basis points above government bond rates, while a similar spread in China (GCNY5YR)shrank 20 basis points to 157……

Indian Prime Minister Manmohan Singh said on Jan. 8 that India’s gross domestic product will rise about 7 percent in the year ending March 31, less than the 7.5 percent rate of expansion he predicted in December. Growth in the $1.7 trillion economy slowed to 6.9 percent in the three months ended Sept. 30, according to the most recent government data…….

Indian companies’ ability to meet interest payments has fallen to a five-year low because of shrinking earnings, rising borrowing costs and losses in the rupee, Mumbai-based Crisil said in a report published this month.

The Reserve Bank of India boosted the repurchase rate by a record 225 basis points, or 2.25 percentage points, in 2011 to 8.5 percent, the highest level since 2008. The rupee slid 12 percent in the past 12 months versus the dollar in Asia’s worst currency performance. It fell 0.5 percent to 51.765 per dollar in Mumbai today, according to data compiled by Bloomberg.

“Companies with substantial debt on their balance sheets will be further hurt by rising interest costs and marked-to- market losses on foreign debt and derivatives due to the depreciation of the rupee,” said Prasad Koparkar, Mumbai-based head of industry research at Crisil……

The average cost of credit-default swaps insuring against debt defaults by seven Indian issuers climbed 237 basis points in the past year to 445 basis points, according to data provider CMA…….

Yields on benchmark 10-year government bonds have climbed 51 basis points in the past two years as the Reserve Bank boosted interest rates. The extra yield demanded by investors to hold the notes over similar-dated U.S. Treasuries widened 146 basis points in the period to 635. The yield on the 8.79 percent note due November 2021 fell five basis points to 8.15 percent today, according to the central bank’s trading system…….

India’s sovereign notes earned 7.6 percent in the past 12 months, while Indonesian securities returned 25 percent in the biggest gain among Asia’s 10 biggest government debt markets outside Japan, according to HSBC Holdings Plc data.