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Informist, Thursday, Oct. 24, 2024

By Vaishali Tyagi and Ashna Mariam George

MUMBAI – The secondary market of corporate bonds witnessed slightly low activity, with yields ending steady across maturities as investors shifted their focus to the primary market where two government-backed entities raised funds through successful bond issuances, dealers said. "After some activity in the morning, momentum came to a standstill post primary market auctions," a dealer at a mid-sized brokerage firm said. 

In contrast, the primary market saw significant activity. Indian Bank and Power Grid Corp. of India Ltd. tapped the primary market Thursday to raise funds. "Overall, the primary market was robust today as both issuances (Indian Bank and Power Grid) were very well received. See, investors are not short of capital, and they are looking to yield profit out of that, which is why we are seeing a good response to these issuances," a fund manager at a mid-sized mutual fund house said. 

Indian Bank Thursday set a coupon of 7.12% on its infrastructure bonds maturing in 10 years, and accepted bids aggregating INR 50 billion, sources told Informist. The issue, which had a base size of INR 20 billion and a greenshoe option of INR 30 billion, was fully subscribed. 

The coupon on the bond was 18 basis points higher than the annualised yield on the 10-year benchmark government bond. According to the bid book accessed by Informist, Indian Bank's infrastructure bonds garnered 82 bids worth INR 145.35 billion at 6.97-7.80% coupon.

The last time Indian Bank tapped the bond market with infrastructure bonds was on Sept. 12, when it raised INR 50 billion through bonds maturing in 10 years at a coupon of 7.24%. The coupon on the bond was 31 basis points higher than the annualised yield on the 10-year benchmark government bond.

State-backed entity Power Grid Corp. raised INR 50 billion through its bullet bonds maturing in 10 years at a coupon of 7.08%. According to the bid book accessed by Informist, Power Grid Corp.'s 10-year bullet bonds garnered 132 bids worth INR 196.75 billion at 6.90-7.80% coupon.

"For the PGCI (Power Grid Corp. of India) 10-year bullet bond, the response was outstanding, we expected the coupon rate to be around 7.28-7.33%, or 20-25 basis points higher, but it was issued at 7.08%," a dealer at a mid-sized brokerage said. "Being a bullet bond, investors value these bonds more than standard issuances because they receive the entire amount in a lump sum at maturity, avoiding the need for reinvestment. This is why the issuer received a better response."

In bullet bonds, the entire principal amount of the bond is paid in one lump sum on a maturity date. Such bonds are non-callable, which means they cannot be redeemed early by their issuer.

In the primary market on Friday, National Bank For Agriculture And Rural Development plans to raise up to INR 70 billion by reissuing bonds maturing on Feb. 24, 2028. Edelweiss Financial Services and Berar Finance are also in line to tap the market on Friday with their respective bond offerings. 

In the secondary market, mutual funds were said to be most active on both sides, while banks were active on the buying side. Most trading happened in the one-to-five-year segment, while a few insurance companies were active in longer segments, dealers said.

Thursday, deals worth INR 81.13 billion were recorded on the National Stock Exchange and BSE combined, against INR 79.23 billion Wednesday. Papers issued by NABARD, REC, Power Finance Corp., Small Industries Development Bank of India, HDFC Bank, LIC Housing Finance, National Housing Bank, and Sundaram Finance were traded the most on the exchanges.

Merchant bankers said the recent bond issuances by Power Grid Corp., Indian Bank, and State Bank of India's Basel-III compliant additional tier-I bonds have witnessed narrow spreads over government securities, which reflects robust investor appetite for high-quality corporate bonds.

Investors are increasingly willing to accept lower yields in exchange for the security offered by AAA-rated issuances. This trend shows the demand for corporate bonds as a safe-haven investment, driven by strong issuer profiles and a shift towards quality amidst global market uncertainties, they said.

UDAY BONDS

In the secondary market, Ujwal DISCOM Assurance Yojana bonds aggregating to INR 100.20 million were traded at a weighted average yield of 7.0269-7.2513%, data from the Reserve Bank of India's Negotiated Dealing System–Order Matching System showed.

* INR 100.00 million of Uttar Pradesh's March 2028 bonds were traded at 7.0269%

* INR 0.20 million of Tamil Nadu's February 2032 bonds were traded at 7.2513%

BENCHMARK LEVELS FOR CORPORATE BONDS:

End

Edited by Deepshikha Bhardwaj

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