India Corporate Bonds
Yields steady; SBI's tier-I bond fully subscribed
This story was originally published at 20:24 IST on 23 October 2024
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By Vaishali Tyagi
MUMBAI – Yields on corporate bonds remained largely unchanged on Wednesday as investors rushed to the primary market where State Bank of India sought bids for its Basel-III compliant additional tier-I bonds, dealers said.
State Bank of India raised INR 50 billion through its tier-I bonds, at a coupon of 7.98%. The issue, which had a base size of INR 20 billion and a greenshoe option of INR 30 billion, was fully subscribed. Merchant bankers said that demand for the issue came from diversified investors, such as insurance companies and pension funds. Mutual funds and banks also bid for the state-owned bank's bonds.
According to the bid book accessed by Informist, SBI's additional tier-I bonds garnered 108 bids worth INR 70.23 billion at 7.50-8.30% coupon. This was SBI's first Basel-III compliant additional tier-I bond issuance in the current financial year. The issue carries a call option that can be exercised after 10 years from the date of allotment. "For SBI's tier-I bond, cut off was slightly better than what market participants had expected as everyone was expecting the coupon to be somewhere above 8%," a dealer at a mid-sized brokerage firm said.
In contrast, the secondary market activity was slightly low, with mutual funds said to be selling and banks most active on the buying side. Trading happened across tenures. Most other players stuck to the sidelines, dealers said. Yields were flat due to lack of domestic and global triggers in the secondary market, they said. "Secondary market saw a dull day today (Wednesday), compared to yesterday (Tuesday) as investors majorly did need-based trade deals and were focused on SBI's issue to check if its cut off will make any impact on yields or not," a dealer at a mid-sized brokerage firm said.
In the secondary market of corporate bonds on Wednesday, deals worth INR 79.24 billion were recorded on the National Stock Exchange and BSE combined, against INR 62.65 billion on Tuesday.
Papers issued by REC, Tata Capital Housing Finance, Maharashtra State Road Development Corp Sea Link, LIC Housing Finance, Small Industries Development Bank of India, and Aditya Birla Finance, were traded the most on the exchanges.
On Thursday, Indian Bank plans to raise up to INR 50 billion through infrastructure bonds maturing in 10 years. Power Grid Corp. of India will tap the market on Thursday to raise up to INR 50 billion through bullet bonds maturing in 10 years. Sandur Manganese & Iron Ore is also in line to raise up to INR 4.50 billion on Thursday through bonds maturing on Sept. 30, 2031.
UDAY BONDS
In the secondary market, Uttar Pradesh's Ujwal DISCOM Assurance Yojana bonds worth INR 2 million, maturing on Mar. 21, 2030, were traded at a weighted average yield of 7.3991%, data from the Reserve Bank of India's Negotiated Dealing System–Order Matching System showed.
BENCHMARK LEVELS FOR CORPORATE BONDS:
TENURE | WEDNESDAY | TUESDAY |
Three-year | 7.47-7.49% | 7.47-7.50% |
Five-year | 7.43-7.46% | 7.44-7.46% |
10-year | 7.20-7.23% | 7.22-7.26% |
End
Edited by Akul Nishant Akhoury
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