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Informist, Wednesday, Sep 11, 2024

By Sachi Pandey and Ashna Mariam George

MUMBAI – Yields on corporate bonds in the secondary market were confined to a narrow range today as investors engaged in only requirement-based trading, dealers said. Some market participants also kept to the sidelines ahead of the US and India CPI data for August, dealers said.

"Everyone is waiting for two main events, US and India's CPI number, which will guide the markets," a vice-president of debt capital markets at a mid-sized brokerage firm said. "People are looking forward to US data points more than Indian CPI data, because it will guide how much of rate cut would be there. If it comes slightly lower, then the chances are the rate cut could be 50 bps (basis points) instead of 25 bps, which the majority expects".

At 1700 IST, prices of Fed Funds futures suggest there is a 65% chance of US interest rates being cut by 25 bps this month to 5.00-5.25%, as per the CME Group. 

US CPI data for August is scheduled for release at 1800 IST today. Market participants expect a lower-than-forecast CPI reading, which may prompt the US Federal Open Market Committee to cut rates sharply, dealers said. 

According to a poll by Reuters, the US CPI is expected to rise 0.2% on month in August, unchanged from the previous month. On a year-on-year basis, inflation was seen rising 2.6% last month, down from 2.9% in July.

"CPI data points is probably more important for the market than FOMC (Federal Open Market Committee), which might be a non-event because by then everything will be already priced in," the vice-president added. The US Federal Reserve's next rate decision is due on Sep 18.

In the secondary market of corporate bonds today, investors avoided placing large bets, as they were waiting for impending inflation data, dealers said. Only mutual funds were active in the shorter tenure, while a very few insurance companies were active at the longer end. 

However, overall sentiment in the market is bullish as the RBI is widely expected to start cutting rates as early as December. "Because the entire curve is coming down, there are positive sentiments in corporate bonds, but the spreads between both (corporate bonds and government securities) are widening since there is a stronger rally in gilts," a fund manager at a mid-sized mutual fund house said. 

Across tenures, the spread between yields on corporate bonds and government bonds ranges from 40 to 78 bps.

Papers issued by the National Bank for Agriculture and Rural Development, Small Industries Development Bank of India, Uttar Pradesh Power Corp, LIC Housing Finance, Aditya Birla Finance, ECAP Equities, Hella Infra Market, Navi Finserv, AYE Finance, and Spandana Sphoorty Financial were traded the most on the exchanges.

Today, deals aggregating to 114.07 bln rupees were recorded on the National Stock Exchange and BSE combined, compared with 79.41 bln rupees on Tuesday.

The primary market also remained dull today with very few companies and financial institutions tapping the market. "Primary market supply has slowed down since there are major events lined up, so the market wants to wait and see the outcome. Once all of this is over we will see major issuers coming to the market," another debt capital markets vice president at a large sized brokerage firm house said. 

Today, Aditya Birla Fashion and Retail raised 5 bln rupees through bonds maturing on Dec 31, 2026, at a fixed coupon of 7.86%. 

On Thursday, Indian Bank plans to raise up to 50 bln rupees through infrastructure bonds maturing in 10 years. L&T Finance also plans to raise 10 bln rupees through partly paid bond. 

Axis Finance will tap the market on Thursday to raise up to 3 bln rupees through the re-issuance of its subordinated bonds maturing on Jun 23, 2034. Tata Capital has invited bids for its subordinated bonds maturing in 10 years to raise up to 2.5 bln rupees. Muthoottu Mini Financiers, and Hinduja Leyland Finance are also lined up to tap the market on Thursday.

UDAY BONDS

In the secondary market, Ujwal DISCOM Assurance Yojana bonds aggregating to 72.60 mln rupees were traded at a weighted average yield of 7.2506-7.3805%, data from the Reserve Bank of India's Negotiated Dealing System–Order Matching System showed.

* 23.70 mln rupees of Punjab's March 2028, and March 2030 bonds were traded at 7.2506-7.3805%

* 19.00 mln rupees of Tamil Nadu's February 2031, and February 2032 bonds were traded at 7.2600-7.3201%

* 18.00 mln rupees of Himachal Pradesh's February 2030 bond was traded at 7.2548%

* 6.90 mln rupees of Uttar Pradesh's March 2029 bond was traded at 7.3687%

* 5.00 mln rupees of Jammu and Kashmir's March 2026 bond was traded at 7.3680%

BENCHMARK LEVELS FOR CORPORATE BONDS: 

End

Edited by Deepshikha Bhardwaj

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