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Informist, Friday, Jul 26, 2024

By Vaishali Tyagi

MUMBAI – Lack of major cues on the domestic front confined corporate bond yields to a tight range in the secondary market today, continuing a week-long pattern of a lacklustre trade, dealers said. Yields on corporate bonds maturing in three and five years fell one to two basis points, tracking similar movement in government bonds, while 10-year paper remained flat.

"Today, yields fell a little for five-year and three-year paper following gilts (government securities) and that is hardly one to two basis points and nothing material was there," a dealer at a mid-sized brokerage said. 

Yields on short-term government bonds fell two-three basis points following the latest draft guidelines on the Basel-III framework on liquidity coverage ratio. The proposed guidelines call for more stringent liquidity buffers, which will necessitate banks to stock up on liquid assets such as short-term gilts which typically form the bulk of these buffers. The yield on the five-year benchmark government bond closed at 6.84%, compared to 6.86% on the previous day. 

The draft guidelines released by the Reserve Bank of India proposes that banks should assign an additional 5% run-off factor on retail deposits opened by customers using internet and mobile banking facilities. These guidelines will spur the demand for short-term bonds from banks as they will have to maintain large amounts of government bonds as a percentage of deposits, and mostly it will be short-term bonds that will be kept aside for the implementation of the new guidelines. 

In the absence of a direction, mutual funds are said to have been lapping up papers maturing in shorter tenures, dealers said. "Yields moved, but we can say it was broadly range bound and shorter tenures papers were more in demand and mutual funds demanded those papers the most," a dealer at a mid-sized brokerage firm said. 

While mutual funds were said to have been buying short-term corporate bonds, banks and insurance companies were said to have been selling bonds, dealers said. Money managers believe that mutual funds actively bought paper to park recently received inflows which led to the sparking of some activity in the market. 

Papers that changed hands on the bourses included those issued by REC, HDFC Bank, Hella Infra Market, LIC Housing Finance, Indiabulls Housing Finance, National Bank for Agriculture and Rural Development, Incred Financial Services, Navi Finserv, Piramal Capital Housing Finance, Uttar Pradesh Power Corporation, Spandana Sphoorty Financial, Kerala Infrastructure Investment.  

Activity in the secondary market remained slightly moderate today with overall deals aggregating to 110.87 bln rupees being recorded on the National Stock Exchange and BSE combined. 

The primary market remained dull today with no major issuances recorded. On Monday, Tata Capital Housing Finance invited bids to raise up to 10 bln rupees through the re-issuances of two bonds of different maturities. Also, frequent issuer Indian Railway Finance Corp invited bids to raise up to 30 bln rupees through bonds maturing in five years.

However, several housing financiers, non-banking financial institutions, and public sector entities have lined up their bond issuances to raise funds next week. According to merchant bankers, plenty of borrowers will tap the market to raise funds through the corporate debt market in the coming days.

UDAY BONDS

In the secondary market, Ujwal DISCOM Assurance Yojana bonds aggregating to 106.30 mln rupees were traded at a weighted average yield of 7.3728-7.5826%, data from the Reserve Bank of India's Negotiated Dealing System–Order Matching system showed.

* 72.8 mln rupees of Uttar Pradesh's 2027-2031 bonds were traded at 7.4786%-7.5513%

* 21.5 mln rupees of Rajasthan's 2025-2026, bonds were traded at 7.5351%-7.5826%

* 10.0 mln rupees of Tamil Nadu's Feb 22, 2027, bonds were traded at 7.3728%

* 2.0 mln rupees of Haryana's Mar 31, 2025, bonds were traded at 7.5594%

BENCHMARK LEVELS FOR CORPORATE BONDS:

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Akul Nishant Akhoury

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