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Informist, Tuesday, Sep 17, 2024

By Ashna Mariam George

MUMBAI – Yields on corporate bonds in the secondary market ended steady today as investors refrained from placing aggressive bets ahead of the US Federal Open Market Committee meeting's outcome, due Wednesday, dealers said. The FOMC's decision on interest rates will be announced at 2330 IST.

"Market is waiting to see whether it (the FOMC decision on interest rates) will be a 25 bps (basis points) or 50 bps cut, and based on that we will see a reaction in the market," a fixed-income senior manager at a mid-sized brokerage said.

Participants said that while the market has already factored in a 25 bps rate cut, there will be a trigger only if the rate cut is of 50 bps. "The expectation of a 25 basis point rate cut is already 100% priced in," a fund-manager at a mid-sized mutual fund house said. "So, if the rate cut is by 25 bps, the market will consolidate at current levels. If it is by 50 bps, we will see movement from the current levels on a downward side."

At 1740 IST, the CME FedWatch tool showed Fed fund futures reflected a 67% probability of a 50 bps rate cut by the US Federal Reserve, and 33% probability of a 25 bps cut.

In the secondary market of corporate bonds, banks were mainly active on both the buying and selling sides, while mutual funds and insurance companies were active on the buying side, dealers said. Banks and mutual funds traded in short-term to medium-term papers, while insurance companies traded in longer-tenure papers, dealers said.

Though the market was mostly active on the shorter end of the curve, the yields remained steady. "Impact of the activity is not directly seen in the non-SLR (non-statutory liquidity ratio) market. The yield movement will come only in two to five days," a dealer at a small public-sector bank said.

Volumes were better today, with deals aggregating to 78.42 bln rupees recorded on the National Stock Exchange and BSE combined, compared with 27.32 bln rupees on Monday. Confusion among market participants due to the shift in the market holiday to Wednesday from Monday kept volumes low on Monday.

Money markets will remain shut on Wednesday for Id-e-Milad.

Papers issued by the National Bank for Agriculture and Rural Development, Export Import Bank of India, Small Industries Development Bank of India, Power Finance Corp, REC, Larsen & Toubro, Bajaj Finance, Tata Capital, Bajaj Housing Finance, Adani Enterprises, and HDFC Credila Financial Services were traded the most on the exchanges.

However, the corporate bonds primary market was quite active today, with several companies and financial institutions tapping the market to raise funds through their respective offerings. Cholamandalam Investment and Finance Co raised 15 bln rupees through a bond maturing on Sep 18, 2027, at a fixed coupon of 8.40%. Tata Power Renewable Energy raised 10 bln rupees through a bond maturing in 10 years at a coupon of 7.85%. The company advanced its bidding for its issuance by a day from Wednesday.

Godrej Housing Finance tapped the market to raise 2.35 bln rupees through a bond maturing on Sep 18, 2029, at a fixed coupon of 8.45%. 

Market participants believe Wednesday's holiday will not affect demand for primary issuances. "I don't think the demand dynamics will be a problem for primary issuances," a fixed-income senior manager at a mid-sized brokerage said. "Bidding will take place and the settlement will be on the allotment date."

On Wednesday, State Bank of India, the country's largest lender, is returning to the debt market with a fresh batch of tier-II bonds. The bank has invited bids to raise up to 75 bln rupees through Basel-III-compliant tier-II bonds maturing in 15 years.

On Aug 28, the bank raised 75 bln rupees through Basel-III-compliant tier-II bonds maturing in 15 years at a coupon of 7.42%. The issue was fully subscribed.

LIC Housing Finance will also tap the market to raise up to 20 bln rupees through bonds maturing on Aug 19, 2031.

Samunnati Financial Intermediation and Services, Arka Fincap, Muthoot Fincorp, Dvara Kshetriya Gramin Financial Services, Midland Microfin, and Reily Homes Realty are also in line to tap the market on Wednesday.

UDAY BONDS

In the secondary market, Ujwal DISCOM Assurance Yojana bonds aggregating to 253.80 mln rupees were traded at a weighted average yield of 7.2767-7.2844%, data from the Reserve Bank of India's Negotiated Dealing System–Order Matching System showed.

* 124.80 mln rupees of Rajasthan's March 2026 and June 2026 bonds were traded at 7.2800-7.2805%

* 91.50 mln rupees of Haryana's March 2026 and June 2026 bonds were traded at 7.2800-7.2844%

* 37.50 mln rupees of Tamil Nadu's Feb 2027 bond was traded at 7.2767%

BENCHMARK LEVELS FOR CORPORATE BONDS:

End

Edited by Rajeev Pai

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