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Informist, Friday, Oct. 18, 2024

By Ashna Mariam George

MUMBAI – Yields on corporate bonds ended the week steady in the secondary market due to lack of major cues on the domestic front and low trade volume, dealers said. "The market was more or less quiet...overall, no major movement is happening, and all the domestic data points are out...now, we don't have any domestic cues to look for," a dealer at a mid-sized pension fund house said. "The market might be waiting for the MPC (Monetary Policy Committee) minutes next week." 

The minutes are due on Wednesday. On Oct. 9, the Reserve Bank of India's rate-setting panel had changed its stance to 'neutral' from 'withdrawal of accommodation,' while keeping the policy repo rate unchanged at 6.50%. "The minutes can possibly give directions to the market, also the governor (RBI Governor Shaktikanta Das) is speaking today (Friday), we will see," the dealer said.

At the Bloomberg India Credit Forum on Friday, Das said it will be pre-mature and risky to cut the policy rate at this stage and that the RBI's decision would depend on incoming data points. Market participants too said they do not expect a cut in December. "We know that there will be a rate cut, but we are not sure whether it is in December or February," the dealer quoted above said. "Whenever it is, the market is well-positioned to maximise the gains."

Das pointed out that foreign investors are using only 15% of the investment capital in corporate bonds and emphasised the need to focus on creating a robust secondary corporate bond market. He highlighted the need for more institutional investors in the bond market.

In the secondary market of corporate bonds, trade volume remained dull for most of the week. On Friday, deals worth only INR 50.99 billion were recorded on the National Stock Exchange and BSE combined, against INR 72.98 billion on Thursday. Papers issued by the National Bank for Agriculture and Rural Development, REC, Small Industries Development Bank of India, HDFC Bank, Bajaj Finance, and Cholamandalam Investment and Finance Co., were traded the most on exchanges.

Market participation was subdued, with only mutual funds actively trading papers across tenures. "A few mutual funds sold in the long-term as well, and pension funds were the buyers there, but all of them were on a need basis," a dealer at a mid-sized brokerage firm said. "Banks and insurance companies were on the sidelines."

The primary market was also dull, with no major deals being recorded. However, market participants said they expect more primary issuances in the upcoming weeks. "Issues were coming back in the primary market after the policy, but now we see a lag after the SEBI (Securities and Exchange Board of India) circular which might be resolved in one or two weeks," a dealer at a financial services company said. 

On Wednesday, SEBI introduced a liquidity window framework to boost activity in the corporate bond market. The liquidity window will allow issuers to offer investors a periodic put option on debt securities, offering an exit to those worried about the illiquid nature of corporate bonds. "The circular opens a room for more liquidity in the market, but we need to wait to get more cues from the issuers," the dealer said.

UDAY BONDS

In the secondary market, Ujwal DISCOM Assurance Yojana bonds aggregating to INR 136.50 million were traded at a weighted average yield of 6.9971-7.1419%, data from the Reserve Bank of India's Negotiated Dealing System–Order Matching System showed.

* INR 44.00 million of Telangana's March 2028 and March 2031 bonds were traded at 7.1100%-7.1115%

* INR 30.00 million of Uttar Pradesh's March 2027 bonds were traded at 7.0044%

* INR 30.00 million of Jharkhand's March 2027 bonds were traded at 7.0048%

* INR 24.00 million of Haryana's July 2025 bonds were traded at 6.9971%

* INR 8.50 million of Rajasthan's June 2025 and March 2026 bonds were traded at 7.1295%-7.1419%

BENCHMARK LEVELS FOR CORPORATE BONDS:

End

Edited by Ashish Shirke

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