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Informist, Wednesday, Sep 4, 2024

By Vaishali Tyagi

MUMBAI – Yields on corporate bonds in the secondary market ended steady today as investors remained on the sidelines ahead of crucial US weekly unemployment numbers, due Thursday, dealers added. Also, US non-farm payrolls data for August will be released on Friday at 1800 IST.

All these data releases will lead up to the US Federal Open Marketing Committee's meeting on Sep 17-18, when the Federal Reserve will decide on interest rate cuts.

"See, people are taking a cautious approach ahead of US data figures, which will paint some clear picture for the Indian market as well as for the Indian debt market," a dealer at a mid-sized brokerage firm said. 

Guidance from the US Fed will likely give some clarity to the Indian bond market and may move corporate bond yields, dealers said. However, yields in fixed income markets remained unaffected by the US manufacturing Purchasing Managers' Index data released on Tuesday. Figures released showed signs of contraction in the US economy.

The US S&P manufacturing PMI printed at 47.9 in August, against a flash print of 48.0 and a final reading of 49.6 in July. The Institute of Supply Management's report on business manufacturing PMI printed at 47.2, against 47.9 expected in a Dow Jones poll. A reading above 50 denotes expansion in activity, while below 50 indicates contraction.

The economic data also increased market participants' expectation of a larger rate-cut by the Federal Open Market Committee in its September meeting than what the market had factored in. Following Tuesday's data, odds of the US central bank cutting interest rates by 50 basis points on Sep 18 rose to 41% from 31% on the previous day, while those for a 25-bps rate cut are seen at 59%, as per the CME FedWatch Tool.

Dealers said whatever limited activity seen in the secondary market was primarily driven by requirement-based trading by mutual funds and banks, but nothing significant happened. "Trading has been there, but it's an on-off thing for some time now," a dealer at a mid-sized brokerage firm said. "We have not seen any major flows in the corporate bond market for past some time as traders are not taking positions that actively. Most of the volume we see came from mutual fund houses only."  

Deals aggregating to 75.95 bln rupees were recorded today on the National Stock Exchange and BSE combined, compared with 124.82 bln rupees on Tuesday. Papers issued by National Bank For Agriculture and Rural Development, REC, State Bank of India, HDFC Bank, Uttar Pradesh Power Corp, Andhra Pradesh State Beverages Corp, LIC Housing Finance, HDFC Bank, Cholamandalam Investment and Finance Co, and Navi Finserv were traded the most on the exchanges.

Mutual funds were active on both the buying and selling sides, while banks were majorly on the buying side, dealers said. Most of the trading activity was seen in shorter tenure notes, and in medium-segments, a dealer at a mid-sized brokerage firm said.

In the primary market today, Axis Bank raised 39.25 bln rupees through bonds maturing in 10 years at a coupon of 7.45%. LIC Housing Finance raised 25 bln rupees through reissuance of bonds maturing in five years at a yield of 7.76%. L&T Finance Ltd also tapped the market to raise 1.75 bln rupees through bonds maturing on Mar 25, 2027, at a coupon of 7.99%.

On Friday, the Indian Renewable Energy Development Agency has invited bids to raise 15 bln rupees through bonds maturing in 15 years. 

Market participants anticipate a fresh round of issuances in the primary market by the end of the ongoing September quarter, and majorly non-banking financial companies are seen tapping the market heavily, followed by banks. "Given that, recent bond issuances were well bid by the investors, we can say that more borrowers can tap the market," a dealer at a mid-sized brokerage firm said.

UDAY BONDS

In the secondary market, Ujwal DISCOM Assurance Yojana bonds aggregating to 17 mln rupees were traded at a weighted average yield of 7.2609-7.2723%, data from the Reserve Bank of India's Negotiated Dealing System–Order Matching System showed.

* 10 mln rupees of Telangana's 2032 bond was traded at 7.2609%

* 7 mln rupees of Rajasthan's 2025 bond was traded at 7.2723%

BENCHMARK LEVELS FOR CORPORATE BONDS:

End

With inputs from Ashna Mariam George

Edited by Tanima Banerjee

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