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Informist, Thursday, Sep 12, 2024

By Sachi Pandey

MUMBAI – Yields on corporate bonds ended steady in the secondary market today as investors refrained from placing large bets ahead of India's CPI data for August, dealers said. "The levels are more or less the same. The market has factored in almost everything, so no surprises for it as of now," a fund manager at a large-sized mutual fund house said. 

India's annual inflation rate based on the Consumer Price Index, which came after market hours, was largely unchanged at 3.65% in August from a revised July print of 3.60%, data released today by the National Statistical Office showed. The CPI print was in line with expectations, seen at 3.6% for August, as per an Informist poll.

Headline inflation remained below the Reserve Bank of India's target of 4% for the second consecutive month after having spent nearly five years above it. This was mainly because of a statistical effect of a high base and weaker month-on-month rise in food prices. 

Moreover, the data released post market hours on Wednesday showed US CPI rose 0.2% on month in August, in line with expectations, and similar to the rise in July. However, the core CPI, which excludes the food and energy components whose prices can sometimes be volatile, was up 0.3% in August, more than the expectation of a 0.2% rise.

In the secondary market of corporate bonds, most of the activity was in the shorter tenure of the curve, dealers said. "...Three- and five-year (corporate bonds) are more active compared to the longer end – because investors are getting good yield pickup there as compared to seven- or 10-year," a dealer at a mid-sized brokerage firm said. "In the longer tenure, insurance companies are now going for SDLs (state development loans) because they get higher or similar yields there compared to corporate (bonds) and it is much safer."

The spread between 10-year corporate bonds and their equivalent state bonds is barely 2 to 3 basis points, which is shifting investors' focus from corporate bonds.

A very few banks and mutual funds were active in the market today. "Mostly mutual funds are switching their maturities, they are selling longer tenure papers and buying short tenure papers," another dealer at a large-sized brokerage firm said.  

Papers issued by the National Bank for Agriculture and Rural Development, Bank of Baroda, HDFC Bank, State Bank of India, Power Finance Corp, Punjab National Bank, Indian Renewable Energy Development Agency, Tata Capital Financial Services, Navi Finserv, and National Housing Bank, were traded the most on the exchanges. Today, deals aggregating to 99.44 bln rupees were recorded on the National Stock Exchange and BSE combined.

In the primary market of corporate bonds, companies and financial institutions raised over 60 bln rupees. "It is normal for issuances to slow down ahead of events. Once the FOMC (Federal Open Market Committee) and RBI (Reserve Bank of India) policy is done, and there is more clarity, we will see more issuances," the fund manager quoted above said. 

Today, Indian Bank tapped the bond market with its first infrastructure bond issue for the financial year ending March. The bank raised 50 bln rupees through bonds maturing in 10 years at a coupon of 7.24%. The bank garnered 88 bids worth 136.8 bln rupees at coupons of 7.13-7.75% for its 10-year infrastructure bond, according to bid book accessed by Informist.  

L&T Finance raised 10 bln rupees through its partly paid bond maturing on Sep 8, 2034 at a coupon of 7.90%. Axis Finance also tapped the market today to raise 2.5 bln rupees through the re-issuance of its subordinated bonds maturing on Jun 23, 2034 at a yield of 8.28%.

Tata Capital raised 2.5 bln rupees through a subordinated bond maturing in 10 years, at a fixed coupon of 8.22%.

Tata Housing Development Co has invited bids on Friday for bonds maturing in three years to raise 4.75 bln rupees. Avanse Financial Services will also seek bids for November 2025 floating rate bonds to raise 1.5 bln rupees.

UDAY BONDS

In the secondary market, Ujwal DISCOM Assurance Yojana bonds aggregating to 124.60 mln rupees were traded at a weighted average yield of 7.2412-7.2825%, data from the Reserve Bank of India's Negotiated Dealing System–Order Matching System showed.

* 35.00 mln rupees of Rajasthan's June 2026 bonds were traded at 7.2825%

* 33.00 mln rupees of Punjab's March 2026 bonds were traded at 7.2773%

* 31.20 mln rupees of Haryana's March 2026 bonds were traded at 7.2811%

* 19.90 mln rupees of Uttar Pradesh's March 2029 bond was traded at 7.2588%

* 5.50 mln rupees of Chhattisgarh's March 2026 bond was traded at 7.2412%

BENCHMARK LEVELS FOR CORPORATE BONDS: 

End

With inputs from Ashna Mariam George

Edited by Tanima Banerjee

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