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Informist, Tuesday, Oct. 22, 2024

By Ashna Mariam George

MUMBAI – Yields on three-year and five-year corporate bonds in the secondary market were confined to a narrow range Tuesday as mutual funds and banks actively traded in papers maturing in these segments, dealers said. However, yields on 10-year corporate bonds remained steady.

"There was activity in three and five-year papers, for profit booking after the rate cut hopes faded away," a dealer at a mid-sized brokerage firm said. "Now, they are more lucrative than the long-term papers." Yields remained in narrow range because the demand for bonds is met by enough supply, the dealer said. 

After Reserve Bank of India Governor Shaktikanta Das Friday said it would be "premature" and "risky" to cut the policy rate at this stage, yields on corporate bonds climbed 3-5 basis points across tenures in the secondary market on Monday. 

Market participants said the rise in yields on corporate bonds in the secondary market is expected to cool down within a week. "Yields moved up after the rate cut news, but it will settle down in a week or so if no new negative data is coming," a dealer at a mid-sized private sector bank said. 

Dealers said there is an ample supply of bonds maturing in one to seven years in the secondary market. "There is not much demand for 10-year papers now...fresh primary issuances in the long term are likely to pick up after a rate cut," a dealer at a mid-sized pension fund house said.

In the secondary market of corporate bonds on Tuesday, both mutual funds and banks actively traded in papers maturing in shorter tenures, while a few insurance companies were active in longer-tenure papers, dealers said. Deals worth INR 62.65 billion were recorded on the National Stock Exchange and BSE, against INR 59.13 billion on Monday. Papers issued by the National Bank for Agriculture and Rural Development, Union Bank of India, HDFC Bank, Tata Capital Housing Finance, and HDB Financial Services, were traded the most on the exchanges. 

The primary market for corporate bonds has started gaining momentum back after the Monetary Policy Committee meeting and the Securities and Exchange Board of India's new liquidity window framework. On Tuesday, Small Industries Development Bank of India raised INR 59.22 billion through its bonds maturing on Apr. 10, 2028, at a coupon of 7.44%. "SIDBI saw a very good response....we were expecting 46 (7.46% coupon), and it came to 44 (7.44% coupon)...banks and mutual funds were the major investors," the brokerage-firm dealer quoted above said. On Tuesday, LIC Housing Finance also raised INR 15 billion through the reissuance of its bonds maturing on Feb. 11, 2028, at a yield of 7.61%. 

On Wednesday, the State Bank of India plans to raise up to INR 50 billion through Basel III compliant additional tier-1 bonds. Mancherial Repallewada Road will also tap the market on Tuesday to raise INR 5.67 billion through the issuance of two bonds of different maturities. Suryapet Khammam Road also plans to raise INR 5.56 billion through two bonds of different maturities on Tuesday. A.K. Capital Finance, Pahal Financial Services, and Samunnati Financial Intermediation & Services are also in line to tap the market on Wednesday with their respective bond offerings.

UDAY BONDS

In the secondary market, Ujwal DISCOM Assurance Yojana bonds aggregating to INR 59.50 million were traded at a weighted average yield of 6.7155-7.1387%, data from the Reserve Bank of India's Negotiated Dealing System–Order Matching System showed.

* INR 55.00 million of Rajasthan's 2026 bonds were traded at 7.1387%

* INR 4.50 million of Punjab's 2026 bonds were traded at 6.7155%

BENCHMARK LEVELS FOR CORPORATE BONDS:

End

With inputs from Vaishali Tyagi

Edited by Vidhi Verma and Manisha Baxla

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