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Informist, Thursday, Jul 18, 2024

By Sachi Pandey

MUMBAI – Yields on three-year corporate bonds fell around 3 basis points in the secondary market today as mutual funds were actively buying papers, dealers said. Corporate bond yields also mirrored government bonds that rose slightly on increased hopes of rate cuts in the US by September. This, in turn, increased expectations of a cut in the domestic policy rate beginning in December, dealers said.

The yield on the three-year benchmark government security ended at 6.89% at the time the Indian market close today.

"There was liquidity from mutual funds, and obviously, corporate bonds followed the g-sec market as well," a fixed income director at a mid-sized brokerage firm said. "In the US there is a bit of a story building for rate cuts, so the overall sentiment is getting better." 

Improved sentiment led to increased participation, with several mutual fund houses, banks, and insurance companies active on both the buying and selling sides of the market, dealers said. Most of the activity was concentrated in the short-term segment. Deals worth 86.02 bln rupees were recorded on the National Stock Exchange and BSE combined today, against 88.71 bln rupees on Tuesday. Market was closed on Wednesday on account of Muharram.

Papers issued by REC, Housing And Urban Development Corporation, HDFC Bank, State Bank of India, Cholamandalam Investment and Finance Co, Power Finance Corp, Punjab National Bank, National Bank for Agriculture and Rural Development, Uttar Pradesh Power Corporation, Small Industries Development Bank of India, Shriram Finance, and HDB Financial Services were traded the most on exchanges today.

In the secondary market today, Punjab's 2025 Ujjwal DISCOM Assurance Yojana bonds were traded at a weighted average yield of 7.1569%, data from the Reserve Bank of India's Negotiated Dealing System–Order Matching System showed.

The primary market saw little action today with only Bank of India and Shriram Finance raising funds. The Bank of India raised 50 bln rupees through infrastructure bonds maturing in 10 years, at a coupon of 7.54%. The issue was fully subscribed.

Shriram Finance raised 2.22 bln rupees through reissuance of bonds maturing on Dec 19, 2025 at a yield of 9.10%. 

On Friday, Renew Wind Energy Jamb has invited bids to raise up to 5 bln rupees through bonds maturing on August 2025 bond. Rare Asset Reconstruction also plans to raise 700 mln rupees through bonds maturing in three years.

According to merchant bankers, plenteous of borrowers will tap the market — especially with longer tenure papers — to raise funds through the corporate debt market in the coming days.

"...people are looking to raise funds. There is little traction in long tenure bonds as well now. Initially, people were not looking to go for long securities, as they were expecting rates to come down, but now they have factored in that even if G-sec (government securities) come down, corporate bond spreads might not," a debt capital market vice-president at a mid-sized brokerage firm said. 

The spread between 10-year government security paper and benchmark corporate bond is around 40 basis points.

BENCHMARK LEVELS FOR CORPORATE BONDS:

End

Edited by Deepshikha Bhardwaj

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