India Corporate Bonds
Yields steady ahead of US FOMC minutes today
This story was originally published at 20:48 IST on 21 August 2024
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By Vaishali Tyagi
MUMBAI – Yields on corporate bonds ended steady in the secondary market today as traders avoided placing significant bets ahead of release of the US Federal Reserve's July meeting minutes, due later today, dealers said.
Even though market participants expect a muted impact from the Fed minutes on fixed-income markets, they will closely watch it for potential market-moving cues. "If government securities react to the FOMC minutes, it may potentially influence the corporate bond market as well," a fund manager at a small mutual fund house said. "The market is expecting the FOMC minutes to be dovish, which may bring some colour to the market."
The market will also look through the minutes of the Reserve Bank of India's August meeting on Thursday and will closely watch the Fed Chair Jerome Powell's speech at the Jackson Hole symposium, which could lend some cues to the market, dealers said.
Traders have factored in a 25-basis-point rate cut in the upcoming US FOMC meeting, but Powell's speech could either reduce or increase the possibility of a 50-bps rate cut, dealers said. According to the CME FedWatch tool, Fed funds futures show a 30.5% chance of a 50 bps rate cut in the US by the FOMC in its upcoming meeting on Sep 18.
Ahead of these events, participation in the secondary market remained subdued today. Only a few banks sold papers in the secondary market of corporate bonds, while mutual funds and insurance companies were on the buying side today, dealers said.
Today, deals aggregating to 115.54 bln rupees were recorded on the National Stock Exchange and BSE combined, against 123.05 bln rupees on Tuesday.
Papers issued by National Bank for Agriculture and Rural Development, REC, Uttar Pradesh Power Corp, HDFC Bank, Power Finance Corp, Hella Infra Market, ICICI Home Finance Co, LIC Housing Finance, Cholamandalam Investment and Finance Co, and Spandana Sphoorty Financial were traded the most on the exchanges.
Meanwhile, activity in the primary market is picking up as several banks and financial institutions are tapping the debt market to raise funds through bonds.
Today, Cholamandalam Investment and Finance Co raised 10 bln rupees through additional tier-I bonds at a fixed coupon of 9.50%. One bank is said to have made a major investment for the issuance. Tata Capital Housing raised 1.6 bln rupees through reissuance of bonds maturing on Aug 5, 2027, at a yield of 7.94%.
LIC Housing Finance has invited bids on Thursday to raise up to 30 bln rupees through bonds maturing in five years. Ahmedabad Ring Road Infrastructure will also tap the market to raise 3.34 bln rupees through bonds maturing on Jun 30, 2026. ECap Equities, KrazyBee Services, SATYA MicroCapital, and SK Finance are also in line to raise funds through bond offerings on Thursday.
Major banks--Canara Bank and Bank of Baroda--have today announced their plans to raise funds through tier-I and infrastructure bonds, respectively, next week.
UDAY BONDS
In the secondary market, Ujwal DISCOM Assurance Yojana bonds aggregating 38.20 mln rupees were traded at a weighted average yield of 7.2187-7.2884%, data from the Reserve Bank of India's Negotiated Dealing System–Order Matching System showed.
* 22.40 mln rupees of Uttar Pradesh's 2029-2030 bonds were traded at 7.2872-7.2884%
* 15.80 mln rupees of Rajasthan's 2025-2026 bonds were traded at 7.2187-7.2493%
BENCHMARK LEVELS FOR CORPORATE BONDS:
TENURE | TODAY | TUESDAY |
Three-year | 7.58-7.60% | 7.59-7.61% |
Five-year | 7.52-7.54% | 7.52-7.53% |
10-year | 7.41-7.43% | 7.41-7.43% |
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
With inputs from Ashna Mariam George
Edited by Manisha Baxla
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