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Informist, Tuesday, Sep 10, 2024

By Vaishali Tyagi

MUMBAI – Yields on corporate bonds were largely steady in the secondary market today as investors refrained from placing large bets in the absence of fresh triggers, dealers said. Further, traders are awaiting the US CPI data due Wednesday, which may give some clarity about the likely quantum of the rate cut by the US Federal Open Market Committee at its upcoming meeting on Sep 17-18.

"There is barely any movement happening, yields are hardly moving 1-2 basis points, that too because of some portfolio churn," a fund manager at a mid-sized mutual fund house said. "The market has already discounted the probability of rate cuts, and is just waiting for clarity (on the size of the cuts by the US Fed Reserve and the Reserve Bank of India)."

At 1818 IST, the CME FedWatch tool showed Fed fund futures reflected a 73% probability of a 25 bps rate cut by the Fed, and 27% probability of a 50 bps cut.

Apart from this, dealers said there is an expectation of a rate cut by the RBI in February and a change in monetary stance by December. Consequently, investors have been keen to lock in the prevailing level of yields, leading to higher activity in the primary market even as the secondary market activity has been muted.

"Investors are very active in the primary market these days and focusing more on fresh issuances (which are expected to come), therefore yields in the secondary market are flattish," a dealer at a mid-sized brokerage said.

In the secondary market for corporate bonds, mutual funds were mainly active and traded in paper maturing in up to 3-5 years, while a few insurance companies traded in longer-tenure paper, dealers said. Banks were also active on the buying side, but not aggressively, they said.

On the whole, activity was subdued throughout the day with volume remaining low, as most players limited their participation to meeting portfolio requirements.

Deals aggregating to 79.41 bln rupees were recorded today on the National Stock Exchange and BSE combined, compared with 88.50 bln rupees on Monday.

Paper issued by National Bank for Agriculture and Rural Development, Power Finance Corp, Uttar Pradesh Power Corp, LIC Housing Finance, Kerala Infrastructure Investment Fund Board, Tata Capital Financial Services, Shriram Finance, Aditya Birla Finance, Navi Finserv, and HDB Financial Services were traded the most on the exchanges.

In the primary market, Shriram Finance raised 10 bln rupees through bonds maturing in 10 years at a coupon of 9.10%. Aditya Birla Housing Finance raised 2.3 bln rupees through bonds maturing in five years, at a fixed coupon of 8.03%. SMFG India Home Finance Co also tapped the market to raise 2 bln rupees through bonds maturing on Sep 10, 2027, at a fixed coupon of 8.07%

Other state-owned entities are also likely to tap the bond market in the coming days. "NABARD, SIDBI and REC might come and they are in talks for the same," a fund manager at a mid-sized mutual fund house said. "I think NABARD may come with 5-year paper and REC might plan with 10-year paper, but am unsure of the amount."

UDAY BONDS

In the secondary market, 24.00 mln rupees of Rajasthan's Ujwal DISCOM Assurance Yojana bond, maturing in March 2025, was traded at a weighted average yield of 7.5790%, data from the Reserve Bank of India's Negotiated Dealing System–Order Matching System showed.

BENCHMARK LEVELS FOR CORPORATE BONDS: 

End

With inputs from Ashna Mariam George

Edited by Rajeev Pai

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