India Corporate Bonds
Sales by MFs ahead of MPC outcome push yields up
This story was originally published at 21:06 IST on 7 October 2024
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By Vaishali Tyagi and Ashna Mariam George
MUMBAI – Yields on corporate bonds rose 3-4 basis points in the secondary market Monday on significant selling by mutual funds and banks, dealers said. With the meeting of the Reserve Bank of India's Monetary Policy Committee kicking off, investors focused on rebalancing their portfolios before the outcome Wednesday.
"Today, heavy selling pressure was seen from mutual fund houses and banks across tenures ahead of the MPC outcome," a dealer at a mid-sized brokerage said. "There was some panic selling as well. Rising tensions in West Asia resulted in overall selling by mutual funds and banks, sending levels up."
Yields on corporate bonds tracked Indian government bond yields which also experienced a slight rise across tenures on account of rising tensions in West Asia and crude oil supply constraints. Yields on three-year Indian government bonds have risen by 3 bps since Friday. "Investors are observing the escalating tensions in the Middle East (West Asia) and its potential impact on oil prices and Indian bond yields."
Mutual funds and banks actively sold paper for profit, which sparked this activity in the market, dealers said. Most of the volumes were concentrated in the short-term segment, while long-tenure papers were less in demand, dealers said.
In the secondary market, volumes were slightly higher Monday with deals aggregating to INR 115.60 billion being recorded on the National Stock Exchange and BSE combined, compared with INR 99.27 billion on Friday.
Papers issued by the National Bank for Agriculture and Rural Development, REC, Small Industries Development Bank of India, Power Finance Corp., HDFC Bank, Sammaan Capital, Bharti Telecom, Shriram Finance, and Mahindra & Mahindra Financial Services, were traded the most on exchanges.
Merchant bankers believe there will be no significant change in the central bank's monetary policy after the rate-setting panel's meeting, but participants remain watchful nevertheless. "We don't expect significant action from the policy outcome even this time, but the committee is likely to maintain a softer stance this time around," an official at a mid-sized mutual fund house said.
In the corporate bonds primary market, HDFC Life Insurance Co. Ltd. raised INR 10 billion through subordinated bonds maturing in 10 years at a fixed coupon of 8.05%. Mahindra & Mahindra Financial Services Ltd. also tapped the market to raise INR 7.5 billion through subordinated bonds maturing on Oct. 6, 2034, at a fixed coupon of 8.24%. Shriram Finance Ltd. set a yield of 9.05% on the reissuance of its subordinated bonds maturing on Jun. 20, 2034, and accepted bids aggregating to INR 1 billion.
On Tuesday, Bajaj Finance Ltd. will tap the market to raise up to INR 30 billion through bonds maturing on Dec. 10, 2027. Tata Projects Ltd. will also tap the market to raise INR 5 billion through unsecured bonds maturing on Oct. 8, 2027. IIFL Home Finance Ltd. and Aye Finance Pvt. Ltd. are also in line to raise funds through their bond offerings.
UDAY BONDS
In the secondary market, Ujwal DISCOM Assurance Yojana bonds aggregating to INR 302.69 million were traded at a weighted average yield of 7.2559-8.1753%, data from the Reserve Bank of India's Negotiated Dealing System–Order Matching System showed.
* INR 153.00 million of Haryana's 2025 and 2026 bonds were traded at 7.413-8.1753%
* INR 64.14 million of Telangana's 2028, 2029, and 2031 bonds were traded at 7.2559%-7.3106%
* INR 40.00 million of Bihar's 2027 bond was traded at 7.34805%
* INR 38.00 million of Punjab's 2026 bond was traded at 7.3922%
* INR 7.55 million of Tamil Nadu's 2027 bond was traded at 7.3566%
BENCHMARK LEVELS FOR CORPORATE BONDS:
TENURE | MONDAY | FRIDAY |
Three-year | 7.53-7.56% | 7.50-7.53% |
Five-year | 7.37-7.40% | 7.35-7.37% |
10-year | 7.26-7.29% | 7.24-7.27% |
End
Edited by Rajeev Pai
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