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Informist, Tuesday, Jan. 21, 2025

By Ashna Mariam George 

MUMBAI – After falling by a few basis points in the initial hours of trade, yields on corporate bonds in the secondary market ended steady on Tuesday, dealers said. "Levels were a little better by 1-2 bps in the morning, because of g-secs (government securities), but ended same as yesterday's (Monday's) levels," a dealer at a mid-sized brokerage firm said. There was some positive buying by mutual funds for their portfolio, the dealer said.

Yields on government securities fell on Tuesday, tracking an overnight fall in US Treasury yields and the announcement of the gilt buyback on Monday. Yields on the 10-year benchmark government security ended at 6.74% on Tuesday against 6.76% on Monday. 

"People are waiting for some stability in the g-sec movement as there is some bit of spread widening (between yields on government securities and corporate bonds) happening," a dealer at a mid-sized private sector bank said. "Till we see any consistent momentum being built in g-secs and there is a directional sense where g-sec is headed towards, corporate bonds will continue to languish."

On Tuesday, the spread between the 10-year benchmark government security and the 10-year benchmark National Bank for Agriculture and Rural Development paper was at 38 basis points while the spread between five-year benchmark papers was at 63 bps.

Another concern for the market participants is the widening liquidity in the banking system. "GST (goods and services tax) outflows have already happened, so we are hoping that the government spending picks up in the last two months of the financial year to help durable liquidity," the private bank dealer quoted above said. 

On Monday, the net liquidity injected by the RBI--a proxy for systemic liquidity conditions--rose to INR 2.36 trillion against INR 1.94 trillion on Sunday, as per data from the RBI. The liquidity deficit widened on Monday due to outflows on account of GST payments, dealers said.

Market participants said the activity in the corporate bond market was slightly better on Tuesday. "Overall, there was more activity than yesterday (Monday), due to some mutual funds buying," a dealer at another mid-sized brokerage firm said. Mutual funds were active on both buying and selling sides, dealing in papers of three-to-five years maturity, dealers said. While insurance companies actively traded in papers of long-term maturities, banks stood on the sidelines on Tuesday, they added. 

Improved activity led to a pickup in trade volumes in the secondary market. Deals aggregating to INR 66.41 billion were recorded on the National Stock Exchange and BSE combined, against INR 42.83 billion on Monday. Papers issued by REC, Tata Capital Housing Finance, Indian Railways Finance Corp., ICICI Home Finance Co., Indian Oil Corp., National Bank For Agriculture And Rural Development, Muthoot Finance, IIFL Finance, and Mankind Pharma were traded most on exchanges. 

In the primary market, infrastructure major Larsen & Toubro raised INR 40 billion through bonds maturing in 10 years, at a fixed coupon of 7.20%. TVS Holdings Ltd. raised INR 3 billion through bonds maturing on Jan. 22, 2030, at a coupon of 8.75%.

In the coming days, some public sector entities have lined up to tap the market for bond issuances. 

UDAY BONDS

None of the Ujjwal DISCOM Assurance Yojana bonds were traded in the secondary market on Tuesday, according to the Reserve Bank of India's Negotiated Dealing System–Order Matching System.

BENCHMARK LEVELS FOR CORPORATE BONDS:

End

Edited by Saji George Titus

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