India Corporate Bonds
Yields steady as RBI policy on expected lines
This story was originally published at 20:59 IST on 8 August 2024
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By Vaishali Tyagi
MUMBAI – The Monetary Policy Committee's third bi-monthly policy statement of the current financial year had broadly no impact on the secondary market yields on corporate bonds today as the outcome was largely in line with the market's expectations, dealers said.
The Reserve Bank of India's Monetary Policy Committee today voted with a 4-2 majority to keep the policy repo rate unchanged at 6.50%. The committee also decided to maintain its stance at "withdrawal of accommodation" to ensure inflation progressively aligns with its target, while supporting growth.
In an Informist poll, all the 30 respondents expected the committee to leave the repo rate unchanged at 6.50%. An overwhelming majority of the respondents also expected the committee to continue with the "withdrawal of accommodation" stance.
"Overall yields were flat (in corporate bonds), and in fact there was no movement (in yields) in government bonds as well," a dealer at a mid-sized mutual fund house said. "The policy (outcome) was largely in line with expectations, which even the market has already factored in."
With the monetary policy committee's status quo lending no fresh direction, the market will closely watch domestic and global macroeconomic developments for further cues on interest rates.
"A small cohort of stakeholders expected that the RBI would give some surprise with respect to the monetary policy stance, but the RBI continued their cautious approach while taking cognisance of global developments," V.R.C. Reddy, head of treasury, Karur Vysya Bank said. "Strong domestic macros are giving comfort to the RBI to maintain a wait and watch approach despite recent talk of a global slowdown, particularly in the US," Reddy said.
Today, a few mutual funds and banks were said to have been active while many still remained on sidelines. The mutual fund activity was concentrated in the shorter-to-medium-term segments of the yield curve, dealers said.
"There was nothing in MPC and people rather called it a non-event policy, and it provided no guidance to the market," a dealer at a mid-sized brokerage firm said. "Even people who were on the sidelines will remain on sidelines, for more time and I would say they are on 'Wait and Watch mode', until something significant come and hit the market."
Today, trade volumes in the secondary market remained low, with overall deals aggregating to 73.21 bln rupees recorded at 1530 IST on the National Stock Exchange and BSE combined, lower than 83.67 bln rupees on Wednesday.
Papers issued by HDFC Bank, Krazybee Services, Adani Airport Holdings, Andhra Pradesh State Beverages Corp, Keertana Finserv, Cholamandalam Investment And Finance Co, Hinduja Leyland Finance, National Bank For Agriculture And Rural Development, Navi Finserv, Uttar Pradesh Power Corp, Spandana Sphoorty Financial, UGRO Capital, Kerala Infrastructure Investment Fund, Shriram Finance, HDB Financial Services, Mahindra Mahindra Financial Services, India Infrastructure Finance Company were traded the most on the bourses.
In the primary market, a few government-backed institutions are lined up to sell bonds next week. National Bank for Agriculture and Rural Development, and National Bank for Financing Infrastructure and Development plans to raise up to 50 bln rupees each through their respective bonds.
On Friday, Aditya Birla Sun Life Insurance has invited bids to raise 2.5 bln rupees through subordinated bonds maturing in 10 years, while Samman capital plans to raise 2 bln rupees through bonds maturing in 10-years. Also, Vedika Credit Capital has also planned to raise 400 mln rupees through bonds maturing in 2026.
According to merchant bankers, few large-sized non-banking financial companies and some state-owned entities are lining up their bond issuances after the outcome of the RBI policy.
UDAY BONDS
No Ujjwal DISCOM Assurance Yojana bonds were traded in the secondary market today, according to the Reserve Bank of India's Negotiated Dealing System–Order Matching System.
BENCHMARK LEVELS FOR CORPORATE BONDS:
TENURE | TODAY | WEDNESDAY |
Three-year | 7.60-7.61% | 7.59-7.61% |
Five-year | 7.51-7.52% | 7.50-7.52% |
10-year | 7.40-7.41% | 7.41-7.43% |
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Aditya Sakorkar
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