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Informist, Monday, Aug 26, 2024

By Vaishali Tyagi 

MUMBAI – Yields on corporate bonds were broadly steady in the secondary market today as investors flocked to the primary market where Bank of Baroda sought bids for its 50-bln-rupee infrastructure bond issue and set a coupon of 7.30%, better than market expectations, dealers said. Market participants expected the coupon for Bank of Baroda's 10-year bond to be in the 7.32-7.40% band. However, the coupon was only 33 basis points over the 10-year benchmark government bond.

"The market was a little surprised by the coupon as everybody expected it to be around 7.35%, but 7.30% we were not expecting," a dealer at a mid-sized brokerage firm said. "We saw a bumper demand for Baroda's infra bond (Bank of Baroda's infrastructure bond) and figuratively if I mention, it was above 15,000 crore (150 bln) rupees". 

The state-owned bank was easily able to raise the entire amount of 50 bln rupees. Demand for the issue largely came from long-term investors such as Life Insurance Corp of India, pension funds, and banks, dealers said.

Market participants are now eagerly waiting for the upcoming bond issuances by state-owned banks, which will raise funds through various types of bonds. Following this trend, Canara Bank is scheduled to tap the market with tier-I bond offering on Tuesday, and targets raising up to 30 bln rupees. Notably, this will be the first Basel-III compliant additional tier-I bond issuance of the ongoing financial year, also marking it to be the first after the Securities and Exchange Board of India's relaxation of their valuation norms for mutual funds.

The regulator has allowed mutual funds to value their additional tier-I bond holdings based on the bond's call option date, or yield-to-call, rather than as 100-year securities, as previously required.

State Bank of India is also in queue to raise 75 bln rupees through a 15-year tier-II bond offering.

"Market seems slightly optimistic about the demand for these bonds, and there are quite a few upcoming issuances from different PSUs (state-owned companies) this week, including Canara Bank, SBI, HPCL, and IRFC, and these are expected to receive good bidding," a dealer at a mid-sized brokerage firm said. 

On Tuesday, apart from Canara Banks's perpetual bond issue, Hindustan Petroleum Corp has also invited bids to raise 25 bln rupees through bonds maturing in five years.

ICICI Securities Primary Dealership has invited bids to raise up to 3 bln rupees through bonds maturing on Apr 26, 2035, while Sundaram Home Finance plans to tap the market to raise 2.45 bln rupees through bonds maturing on Nov 27, 2026. Navi Finserv will seek bids to raise up to 1.5 bln rupees through bonds maturing on Aug 27, 2027. Hero Fincorp has invited bids to raise up to 1.25 bln rupees through perpetual bonds.

In the secondary market, yields were flat due to lack of domestic and global triggers, dealers said. They expect the corporate bond market to remain lacklustre unless there are some significant cues. Only a few mutual funds and banks were said to have been active in the market today on both the selling and buying sides. 

Today, overall deals aggregating to 83.26 bln rupees were recorded on the National Stock Exchange and BSE combined, against 101.61 bln rupees on Friday.

Papers issued by National Bank for Agriculture and Rural Development, State Bank of India, Bajaj Finance, Tata Capital Financial Services, Keertana Finserv, Cholamandalam Investment And Finance Co, Sammaan Capital, Navi Finserv, Shriram Finance were traded the most on the exchanges.   

UDAY BONDS

In the secondary market, Ujwal DISCOM Assurance Yojana bonds aggregating 32 mln rupees were traded at a weighted average yield of 7.0307-7.3953%, data from the Reserve Bank of India's Negotiated Dealing System–Order Matching System showed.

* 11.80 mln rupees of Uttar Pradesh's March 2027 bond were traded at 7.0307%

* 10 mln rupees of Telangana's March 2026, and March 2029 bonds were traded at 7.3254-7.3953%

* 9.20 mln rupees of Punjab's March 2031 bond were traded at 7.3080%

* 1 mln rupees of Jharkhand's March 2028 bond were traded at 7.3241%

BENCHMARK LEVELS FOR CORPORATE BONDS:

End

With inputs from Ashna Mariam George

Edited by Tanima Banerjee

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