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Informist, Friday, Sep 6, 2024

By Vaishali Tyagi and Ashna Mariam George

MUMBAI – Yields on corporate bonds remained largely unchanged today across maturities in the secondary market as most investors were active in the primary market where they bid for bonds, including those of Bank of Baroda and Indian Renewable Energy Development Agency, dealers said.

Bank of Baroda raised 50 bln rupees through 10-year infrastructure bonds at a coupon of 7.26%, lower than its previous coupon of 7.30%. Long-term investors, including insurance companies and pension funds, drove demand for the issue.

"For BoB infra (Bank of Baroda's infrastructure bond), market expected 28 to 30 (yield of 7.28-7.30%), but it came down to 26 (7.26%). Maybe liquidity is increasing and everyone is deploying the money. It was almost along what the market expected, but a difference of 1-2 basis points is fine," a dealer at a mid-sized brokerage said.

On Thursday, the liquidity surplus in the banking system was 2.55 trln rupees, slightly higher than 2.46 trln rupees on Wednesday, according to RBI data. The surplus widened, likely due to regular government spending, dealers said. Liquidity surplus in the banking system had widened earlier this week after inflows on account of the government's month-end spending infused around 1 trln rupees into the banking system, they said.

Just over a week ago, the bank tapped the market with infrastructure bonds and raised 50 bln rupees through bonds maturing in 10 years at a coupon of 7.30%.

Another state-backed entity, Indian Renewable Energy Development Agency, today raised 15 bln rupees through bonds maturing in 15 years at a coupon of 7.36%, in line with market expectation. "For IREDA's 15-year bond we expected 35 to 40 levels (yields of 7.35-7.40%) and it came at 36 level (7.36%)," a dealer at a mid-sized brokerage said. 

Aditya Birla Finance tapped the market to raise 4.60 bln rupees through bonds maturing on Sep 7, 2029, at a fixed coupon of 8.10%.

In contrast, the secondary market activity was slightly low, with mutual funds said to be selling and banks most active on the buying side. Most trading happened in the one-to-five-year segment, while a few insurance companies were active in longer segments, dealers said. Yields were flat due to lack of domestic and global triggers in the fixed income market and are expected to remain lacklustre unless there are some significant cues, they said.

"There is no rally in the market as no significant event took place that could guide the market, be it globally or domestically," a dealer at a mid-sized brokerage said. "Yes, we can say that some data points are hanging, like the domestic inflation data." India's CPI data are due out Thursday.

Deals aggregating to 88.02 bln rupees were recorded today on the National Stock Exchange and BSE combined, compared with 79.25 bln rupees on Thursday. Paper issued by National Bank for Agriculture and Rural Development, Small Industries Development Bank of India, Uttar Pradesh Power Corp, LIC Housing Finance, HDFC Bank, Cholamandalam Investment and Finance Co, Krazybee Services, Keertana Finserv, Navi Finserv, Spandana Sphoorty Financial, and HDB Financial Services were traded the most on the exchanges.

Merchant bankers believe that more private and state-owned banks may tap the market to borrow funds. "Probably banks might come up with more tier-II or infrastructure bond issuances, because banks are short of capital, and they might need more capital to lend, and the deposits are not really how they are supposed to be," a fund manager at a mid-sized mutual fund house said.

UDAY BONDS

In the secondary market, Ujwal DISCOM Assurance Yojana bonds aggregating to 13.80 mln rupees were traded at a weighted average yield of 7.2615-7.2722%, 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 was traded at 7.2615%

* 2.00 mln rupees of Tamil Nadu's February 2028 bond was traded at 7.2722%

BENCHMARK LEVELS FOR CORPORATE BONDS: 

End

Edited by Rajeev Pai

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