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Informist, Tuesday, Oct. 1, 2024

By Sachi Pandey

MUMBAI – Lack of major cues on the domestic front, and low trading volume confined corporate bond yields to a tight range in the secondary market on the first day of the December quarter, dealers said. "The sentiment is positive, but no major movement as there is nothing new; no new trigger. There is activity in the shorter tenure, but levels remain flat", a director of fixed income markets at a mid-sized brokerage firm said. 

On Tuesday, mutual funds were said to have been active ahead of inflows from the government's month-end spending, which are estimated to be around INR 1.45 trillion, dealers said. "Liquidity is yet to flow to mutual funds, so once the flows are in then there will be more activity. Probably from Thursday and Friday we will see some traction in the market", the director added.

Market participants expect the inflow amount to be comparatively greater at the end of September as additional inflows entered via interest payments which were due towards the quarter-end. The liquidity in the banking system was in a surplus of INR 1.46 trillion on Monday, as against INR 798.06 billion on Sunday.

Apart from mutual funds, a few banks and insurance companies were also active in the corporate bond markets. 

Market experts are now looking forward to the Monetary Policy Committee meeting which is scheduled from Oct. 7 to Oct. 9. "People are hoping to get some direction from the policy. The market will get more clarity on where we are going with the rate cut or stance change. So this (steady market) is just a pre-policy reaction," a dealer at a large sized private sector bank said. 

Bets of a policy stance change to "neutral" from "withdrawal of accommodation" by the Monetary Policy Committee next week have increased after the Federal Open Market Committee last month cut rates by 50 basis points. Most dealers were, however, circumspect about whether the new six-member panel with the addition of three new members would go for any change at its first meeting after nine straight meetings of status quo on the policy rate and stance.

The terms of MPC external members Ashima Goyal, Jayanth Varma, and Shashanka Bhide are scheduled to end on Friday. The announcement of three new external members is expected after market hours Tuesday, dealers said.

In the secondary market of corporate bonds, volume remained dull Tuesday with deals aggregating to INR 101.95 billion recorded on the National Stock Exchange and BSE combined. Most of the activity was concentrated on the shorter-tenure segment of the market. 

Papers issued by the National Bank For Agriculture And Rural Development, Power Finance Corp., REC, National Housing Bank, HDFC Bank, Bank of India, LIC Housing Finance, Cholamandalam Investment And Finance Co., Bajaj Finance, Bajaj Housing Finance, and Kotak Mahindra Prime were traded the most on the exchanges Tuesday.

The primary market of corporate bonds was also quiet Tuesday with very few companies like Bajaj Finance and Bajaj Housing Finance tapping the market to raise funds. On Thursday, too, a very few non-banking financial companies are lined up to raise funds through their respective bond offerings. 

Muthoot Finance plans to raise up to INR 15 billion through bonds maturing on Oct. 4, 2029, while Cholamanadalam Investment and Finance Co plans to raise INR 5 billion through bonds with the same maturity. Kotak Mahindra Prime will also seek bids for two short-term bond issuances to raise up to INR 5.5 billion. L&T Finance has invited bids to raise INR 5 billion through two bonds maturing in Sept. 2027 and Jun. 2027.

According to market participants, many public sector entities and non-banking financial companies are in queue to raise funds through corporate bonds and will announce the bidding details by Friday. Money markets will remain closed Wednesday for Gandhi Jayanti.

UDAY BONDS

In the secondary market, Telangana's Ujwal DISCOM Assurance Yojana bond worth INR 450,000, maturing in March 2029, was traded at a weighted average yield of 7.1664%, data from the Reserve Bank of India's Negotiated Dealing System–Order Matching System showed.

BENCHMARK LEVELS FOR CORPORATE BONDS: 

End

Edited by Deepshikha Bhardwaj

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