The cost of protecting the State Bank of India's debt default fell for 11 consecutive days & Swaps credit-default on the Mumbai-based State Bank fell 55 basis points

The cost of protecting the State Bank of India's debt default fell for 11 consecutive days, the longest streak of declines since at least 2004, and the willingness of lenders to lend emphasizes improvement in the economy.

Swaps credit-default on the Mumbai-based State Bank fell 55 basis points, or 0.55 percentage points over the last six months to 155 on December 16, CMA data show. Bank of China Ltd. contracts fell 24 basis points to 118 while those of OAO Sberbank, Russia's biggest bank, fell from 11 to 188.

The perceived creditworthiness of the largest bank in India have improved faster than for the largest lenders in other emerging markets as companies increase lending for construction projects. Prime Minister Manmohan Singh goes to a 9 percent growth for at least the next three decades and plans to spend about $ 1 billion in roads, ports and public infrastructure.

"Reserve Bank of India has been quick in raising rates to contain inflation, the economy is strong, NPL ratios are under control and bank swaps credit-default are reflecting that," Vijay Chander, director Hong Kong's credit strategy at Standard Chartered Plc, said in an interview.

International bond sales in India amounted to $ 11.2 billion this year of $ 2.4 billion in 2009, accounting for the bank debt of 60 percent. New sales of bonds from banks in India could rise to U.S. $ 7 billion years to come, according to Nomura Holdings Inc. In India seeks funds for key infrastructure projects "foreign capital may be even more useful," said the Fund International Monetary Dominique Strauss-Kahn said in a speech of 02 December.

Infrastructure demand

"There is a greater demand for loans to infrastructure," said Nonda Nicolaides, senior banking analyst at Moody's Investors Service, in a telephone interview from Limassol, Cyprus. "India is an economy with great growth potential have not seen a problem even for banks to sell dollar bonds."

The outlook for India's banking system is suitable for growing high-yield credit and economic expansion to pre-crisis levels and increase deposits, Moody's said in a report of 16 December.

The performance of Bank of India $ 500 million 4.75 percent notes due September 2015 fell 41 basis points to 235 over Treasuries since 1 December, BNP Paribas SA show prices. The decline compares with a fall of 55 basis points for Bank of Moscow OJSC 750 million percent notes due 6699 in March 2015. The performance of Banco Santander Brasil SA $ 500 million of 4.5 percent bonds due April 2015 fell 46 basis points to 266 during the same period.

"No Disadvantage Much '

India's banks to "underperform" in the recent Asian corporate bond rally now looking for a good relationship, according to Royal Bank of Scotland Plc investigation.

"For credit investors do not see the floor much," said Kristine Li, a strategist for Asia-Pacific credit at the Royal Bank of Scotland in an interview from Singapore. "Banks in India have better fundamentals in terms of asset quality and stability of revenues and margins tightened against Russia and Brazil are well justified."

Indian dollar bonds returned 9.4 percent this year. The extra yield investors demand to hold the notes instead of U.S. Treasuries fell six basis points last week and fell 80 basis points to 334 this semester, according to HSBC Holdings Plc index Asia dollar bonds to India, where banks have a weighting of 71 percent. That compares with a decline of 99 basis points for dollar bonds of Asian banks, JPMorgan Chase & Co. 's Finance Blended show propagation rate.

An increase in dollar funding costs meant some banks in India has postponed sales. Union Bank of India may delay the planned sale of notes on the rise in interbank rates in London, chairman MV Nair said in New Delhi last week.

"Aggressive pricing"

"Banks in India tend to be opportunistic and aggressive, relatively new issue market in setting prices," said Li, citing domestic liquidity as a risk. With "more money flowing into emerging markets, spreads compression through Asian banks and Indian banks show strong earnings performance, credit should catch up with other banks in Asia," said Li.

BES Investimento do Brasil SA, $ 500 million 5625 notes per cent since March 2015, scored the second lowest investment-grade Baa2 by Moody's, are trading at a yield of 506 basis points more than Treasuries of according to Trace. Similar rated 4.75 percent bond maturing in October 2015 from Vadodara, Gujarat, based in the Bank of Baroda trade at a spread of 272 basis points, BNP Paribas show prices.

Regulators seek to control the type of risks that caused the financial crisis reached a compromise in Switzerland in September that more than doubles the capital requirements for banks in the world while giving them eight years to comply.

Rupee Falls

The Committee on Banking Supervision wants banks to have sufficient assets that can be converted into cash to meet their needs in a "scenario of severe liquidity strains," according to a document. While India's central bank has not said whether to adopt the so-called Basel III, banks are "in good position to make the transition to a more stringent capital," Moody's said in its report.

Contracts debt protection ICICI Bank Ltd., the second largest bank in India, fell 21 basis points this month to 193 basis points, after hitting a two-month low of 191.5 weeks past, CMA prices show. bank default swaps have fallen 62 basis points from 1 July.

The rupee fell last week after two weeks of gains. The rupee lost 0.7 percent during the week to 45.3550 per dollar. Indian markets were closed Dec. 17 for a holiday.

Government bonds rose in the week, driving yields to the lowest level in a month and a half after the central bank said it will buy 480 billion rupees (10.6 billion) of debt over four weeks to raise cash in banks.

The yield of 7.80 percent, due May 2020 fell 12 basis points to 7.95 percent, according to the trading system of the Central Bank. Production decreased 13 basis points.