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Informist, Wednesday, Sep 25, 2024

By Ashna Mariam George

MUMBAI – Yields on 10-year corporate bonds fell marginally in the secondary market today tracking a similar movement in Indian government bond yields, dealers said. However, yields on corporate bonds maturing in three years and five years remained steady.

Yields on Indian government bonds fell today due to an overnight fall in US Treasury yields and increasing hope of a cut in the government's gross borrowing for 2024-25 (Apr-Mar). Traders bet on a 100 bln-300 bln-rupee cut in the gross borrowing target of 14.01 trln rupees when the Oct-Mar borrowing calendar will be released this week. Meanwhile, the yield on the 10-year US Treasury note fell to a low of 3.73% today, from 3.80% at 1700 IST on Tuesday.

"Yield on 10-year papers fell tracking the g-secs (government securities), and the yield curve is expected to further fall down," a dealer at a brokerage firm said. "There is consensus amongst the market participants that the rates will not go up, so we will continue seeing a downward trend."

A limited supply of longer-tenure papers in the secondary market also contributed to the fall in yields of 10-year bonds, dealers said. "For 10-year papers in the corporate bond market, buyers are more and sellers are less," a fund manager at a large-sized mutual fund house said. "There are people who are in search of higher maturity corporate bonds, but now the most issuances (in the primary market) are coming in the three-year, five-year, and seven-year, papers and the issuance of 10-year papers are a little dry compared to papers of other maturities."

In the secondary market of corporate bonds, most participants were active today, dealers said. Banks and mutual funds were active on both the buying and selling sides today across tenures, they said. Insurance companies were also seen active in the market today, they said.

Papers issued by the National Bank for Agriculture and Rural Development, REC, LIC Housing Finance, Power Finance Corp, Small Industries Development Bank of India, Bajaj Finance, and Mahindra & Mahindra Financial Services were traded the most on exchanges.

Today, deals aggregating to 139.86 bln rupees were recorded on the National Stock Exchange and BSE combined, compared with 121.58 bln rupees on Tuesday.

Activity in the primary market of corporate bonds was high with several companies and financial institutions tapping it to raise funds through their respective offerings. Bank of India today raised 25 bln rupees through its Basel-III-compliant tier-II bonds maturing in 10 years at a coupon of 7.49%. 

"The market expectation (for Bank of India's coupon cut-off) was slightly higher than the cut-off, and it clearly states that the buying momentum is good in the market," the fund manager quoted above said. The demand for the issue came majorly from banks, mutual funds, and long-term investors like insurance companies and pension funds, market participants said. 

Market participants anticipated that Bank of India's 10-year tier-II bond issue will bag a coupon of 7.55-7.60%. On Sep 12, Informist exclusively reported that Bank of India is likely to raise up to 25 bln rupees through its first Basel-III-compliant tier-II bond issue and may seek bids in two weeks. 

Mahindra & Mahindra Financial Services today raised 12.5 bln rupees through bonds maturing on Dec 24, 2027, at a fixed coupon of 8.01%. DLF Cyber City Developers also raised 5 bln rupees through bonds maturing on Sep 24, 2027, at a fixed coupon of 8.12%. Sundaram Home Finance also tapped the market today to raise 3.50 bln rupees through bonds maturing on Sep 24, 2027, at a fixed coupon of 7.90%. All the issuances were fully subscribed.

On Thursday, several companies and financial institutions are lined up to tap the corporate bond market to raise funds. LIC Housing Finance has invited bids to raise up to 30 bln rupees through reissuance of bonds maturing on Aug 29, 2034. Aditya Birla Finance will also tap the market on Thursday to raise up to 6 bln rupees through reissuance of two bonds with different maturities. 

Shriram Finance, Godrej Finance, Hero Fincorp, Vivriti Capital, Avanse Financial Services, and ECap Equities have also invited bids on Thursday for their respective bond offerings. 

UDAY BONDS

In the secondary market, Ujwal DISCOM Assurance Yojana bonds aggregating to 144.30 mln rupees were traded at a weighted average yield of 6.9840-7.1910%, data from the Reserve Bank of India's Negotiated Dealing System–Order Matching System showed.

* 104.00 mln rupees of Uttar Pradesh's June 2025, and March 2027 bonds were traded at 6.9840-7.1798%

* 33.50 mln rupees of Tamil Nadu's February 2027, and March 2029 bonds were traded at 7.1399-7.1902%

* 3.00 mln rupees of Telangana's March 2029 bond was traded at 7.1901%

* 1.50 mln rupees of Chhattisgarh's March 2029 bond was traded at 7.1910%

* 1.30 mln rupees of Punjab's March 2029 bond was traded at 7.1890%

* 1.00 mln rupees of Jharkhand's March 2028 bond was traded at 7.1896%

BENCHMARK LEVELS FOR CORPORATE BONDS:

End

With inputs from Vaishali Tyagi

Edited by Deepshikha Bhardwaj

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