India Corporate Bonds
Need-based trading keeps yields steady; MPC eyed
This story was originally published at 21:51 IST on 8 October 2024
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By Vaishali Tyagi
MUMBAI – Yields on corporate bonds ended steady in the secondary market on Tuesday after rising 3-4 basis points on Monday because most market participants limited activity to meet their basic portfolio requirements, dealers said.
"There was some dullness in the market today (Tuesday) compared to yesterday (Monday) as most people seem to be involved only in need-based trading," a dealer at a mid-sized brokerage firm said. "Also, we saw very low liquidity in the longer-tenure paper, and that's keeping the overall activity low and yields flat especially in this (longer tenure) segment."
Dealers said traders avoided aggressive bets ahead of the Reserve Bank of India's Monetary Policy Committee meeting outcome, which will be detailed by RBI Governor Shaktikanta Das at 1000 IST on Wednesday. "We are expecting no surprises from the central bank's MPC outcome, yet the market participants remained on sidelines," a fund manager at a mid-sized mutual fund house said.
The majority of merchant bankers believe a stance change is unlikely at this policy meeting. They are uncertain about the outcome of the ongoing policy meeting due to geopolitical tensions in West Asia and the appointment of three new external members. This uncertainty has led to reduced expectations of a change in the MPC's stance. The MPC has kept its stance at 'withdrawal of accomodation' unchanged since June 2022.
In the secondary market for corporate bonds, mutual funds, and banks were mainly active on both the buying and selling sides, and traded in papers maturing in the shorter tenure, dealers said. A handful of insurance companies were also active in the longer-tenure paper but with limited activity, a dealer at a mid-sized brokerage firm said.
Deals aggregating INR 119.04 billion were recorded on the National Stock Exchange and BSE combined, compared with INR 115.60 billion on Monday.
Papers issued by the National Bank For Agriculture And Rural Development, REC, Housing And Urban Development Corp., HDFC Bank, Indian Railway Finance Corp, Shriram Finance, Maharashtra State Road Development Corp. Sea Link, and HDB Financial Services were traded the most on exchanges.
On Tuesday, the primary market saw limited activity as a handful of corporates tapped the market to raise money. On Wednesday, SK Finance plans to raise up to INR 2.5 billion through bonds maturing in three years. HDB Financial Services will also tap the market on Wednesday to raise up to INR 1.5 billion through a bond maturing in January 2028.
UDAY BONDS
In the secondary market, Rajasthan's Ujwal DISCOM Assurance Yojana bonds worth INR 8.50 million, maturing in 2025 and 2026, were traded at a weighted average yield of 7.2554%-7.5612%, data from the Reserve Bank of India's Negotiated Dealing System–Order Matching System showed.
BENCHMARK LEVELS FOR CORPORATE BONDS:
TENURE | TUESDAY | MONDAY |
Three-year | 7.52-7.55% | 7.53-7.56% |
Five-year | 7.36-7.39% | 7.37-7.40% |
10-year | 7.26-7.27% | 7.26-7.29% |
End
Edited by Avishek Dutta
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