Source: Business Standard
Indian Railway Finance Corporation (IRFC), the financing arm of Indian Railways, has raised ₹3,000 crore through five-year bonds at a record low cut-off rate of 6.65%, according to sources. This is the lowest yield ever recorded for IRFC’s five-year bonds according to sources.
The bond issue saw strong demand, with investors offering more than three times the amount IRFC planned to raise. Experts say this was driven by high investor interest in short-term bonds, hopes of another interest rate cut by the Reserve Bank of India (RBI), and surplus liquidity in the market. A market expert noted that IRFC’s strong credit rating (AAA) and its close ties to Indian Railways helped attract investors.
“IRFC’s five-year bond issuance, priced at 6.65 percent, with a spread of 65–70 bps over comparable sovereign securities, witnessed strong demand, with subscriptions exceeding three times the accepted amount of ₹3,000 crore. The credit spread is reasonable, considering IRFC’s AAA rating and Navratna status,” said a market participant.
Venkatakrishnan Srinivasan, founder of Rockfort Fincap LLP said, “IRFC’s finer pricing on its recent five-year bond—at just 70 bps over G-Secs, tighter than the usual 80 bps for AAA PSUs—was driven by strong demand, rate cut hopes, and easy liquidity. With inflation easing, RBI’s expected 25 bps cut boosted bond markets, while mutual funds piled into shorter-tenor papers. Limited supply in the five-year segment, as most PSUs borrow longer, also helped compress spreads. Quasi-sovereign status and IRFC’s close ties to Indian Railways further bolstered investor confidence,”
Government bond yields have also been falling. Since the start of the financial year 2025-26, the 10-year government bond yield has dropped by 32 basis points, and the five-year yield by 50 basis points. This is mainly due to the RBI’s liquidity support and open market operations. The central bank has already cut interest rates twice this year and may cut rates again in the coming months.
April, usually a quiet month for bond markets, saw high activity, with companies issuing around ₹1 lakh crore in bonds. Although tensions between India and Pakistan had briefly pushed yields higher, the announcement of a ceasefire brought yields back down.
“The demand was there from all the segments, especially mutual funds, because the market is better and there is no negative news for the bond market right now,” said another market participant on IRFC’s record low cut-off.
Meanwhile, Power Finance Corporation (PFC), another government-owned company, is also planning to raise ₹2,500 crore through five-year bonds next week.
