India Corporate Bonds
3-yr yields fall tracking G-sec; volume low
This story was originally published at 21:53 IST on 15 July 2024
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By Vaishali Tyagi
MUMBAI – Yields on corporate bonds maturing in three years fell slightly today in line with the government bond market, dealers said. "Today, yields fell a little for three-year paper following gilts (government securities) which opened a little better (higher) today," a dealer at a mid-sized brokerage said. "Most people are waiting for the Union Budget, so for now, only requirement-based trading is happening."
In early trade, yields on government bonds inched slightly higher due to higher-than-expected India CPI inflation data for June, dealers said. However, later in the day, yields fell marginally after robust purchases from state-owned banks, with short-term bond yields leading the fall.
India's CPI inflation rose to 5.08% in June from 4.80% in May. The data were released after market hours on Friday.
However, yields on bonds maturing in five years and 10 years remained broadly steady as market participants refrained from taking any significant positions ahead of the Budget on Jul 23. This resulted in subdued activity with only a few mutual funds active on the buying side and banks on the selling side, dealers said.
Most participants engaged only in necessity-driven trading and investors were focused on fulfilling immediate requirements rather than taking on additional risks ahead of the Budget, dealers said. The dull participation also affected overall trade volume, with deals worth only 49.77 bln rupees being recorded on the National Stock Exchange and BSE combined at 1500 IST, compared with 75.32 bln rupees on Friday.
None of the Ujjwal DISCOM Assurance Yojana bonds were traded in the secondary market today, data from the Reserve Bank of India's Negotiated Dealing System–Order Matching System showed.
Bonds issued by Indian Railway Finance Corp, State Bank of India, Hella Infra Market, Bajaj Finance Ltd, Navi Finserv Ltd, Uttar Pradesh Power Corp, Kerala Infrastructure Investment Fund Board, and Spandana Sphoorty Financial were traded the most across tenures today.
The primary market saw deals worth 18.50 bln rupees for bonds maturing in five years. Housing and Urban Development Corp raised 18.50 bln rupees through a five-year bond at a semi-annual coupon of 7.28%.
Tata Capital Housing Finance Ltd raised 3.4 bln rupees through two bonds of different maturities. Kohima Mariani Transmission raised 2.75 bln rupees through bonds maturing on Jun 30, 2027. Toyota Financial Services Ltd raised 1.25 bln rupees through bonds maturing in five years, and Hero Housing Finance raised 1 bln rupees through bonds maturing in five years.
With several banks tapping the market to raise funds through infrastructure bonds, Canara Bank also invited bids on Tuesday. The bank plans to raise up to 100 bln rupees through infrastructure bonds maturing in 10 years. Market participants expect the coupon on Canara Bank's infrastructure bonds to be around 7.40%, a source closely involved in the transaction told Informist. "There is good demand for infra (infrastructure) bonds at this point, but since a lot of banks are tapping the market, the levels might get affected," a dealer at a mid-sized mutual fund house said.
On Tuesday, frequent issuer REC is planning to raise up to 60 bln rupees through two bonds with different maturities. Muthoot Finance and SBFC Financial are also in queue to seek bids for their respective bond issuances.
According to merchant bankers, several banks and non-banking finance companies are expected to tap the market with bond offerings in the near term.
BENCHMARK LEVELS FOR CORPORATE BONDS:
TENURE | TODAY | FRIDAY |
Three-year | 7.65-7.66% | 7.67-7.68% |
Five-year | 7.61-7.62% | 7.60-7.61% |
10-year | 7.49-7.50% | 7.49-7.50% |
End
Edited by Rajeev Pai and Vidhi Verma
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