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Informist, Friday, Nov. 8, 2024

By Sachi Pandey

MUMBAI – Yields on corporate bonds in the secondary market ended steady Friday as the US Federal Open Market Committee's decision to cut the fed funds target range by 25 basis points was in line with expectations, dealers said. "Why should there be a movement in yields? Everything was already factored in. Everone knew they would cut 25 bps and had already taken their positions accordingly," a fund manager at a large-sized mutual fund house said.  

The Federal Reserve, early Friday, approved the quarter percentage point cut to a target range of 4.50-4.75%, after September's jumbo 50-bps reduction. While market participants had fully priced in a 25-bps cut by the FOMC, they were awaiting US Federal Reserve Chair Jerome Powell's comments on future rate cuts, especially after Republican Donald Trump won the election, dealers said. Powell, however, said Donald Trump's win in the US presidential election would have no near-term impact on the FOMC's rate decisions. He added saying that the FOMC would consider policy decisions made by the new US government only when these are announced or implemented.

With the FOMC's rate decisions lending no fresh direction, the market is now looking after the Reserve Bank of India's next bi-monthly Monetary Policy Committee meeting which is scheduled for Dec. 4 to Dec. 6 for some new triggers for corporate markets. "I do not see any trigger till RBI policy now. Even the inflation numbers are expected to be higher, so it won't give any new cues,"  

India's CPI inflation print for October is due for release at 1600 IST on Tuesday. According to the median of 20 economists polled by Informist, headline consumer inflation is seen at a 14-month high of 5.9% in October, well above the RBI's target of 4% and just below the 6% top of its comfort band.

A lower print along with a lower Jul-Sept GDP could influence the Monetary Policy Committee to cut rates as early as December, against the widely expected February, dealers said. However, if CPI inflation substantially tops 6%, rate cuts are likely to be completely off the table at the Monetary Policy Committee's next meeting, they added.

The secondary market of corporate bonds remained dull, with very few banks and mutual funds trading papers in the five to seven-year segment. Deals aggregating to INR 113.81 billion were recorded on the National Stock Exchange and BSE combined, compared with INR 87.43 billion on Thursday. Papers issued by REC, HDFC Bank, State Bank of India, LIC Housing Finance, National Bank For Agriculture And Rural Development, Bank of Maharashtra, Indian Bank, Sundaram Finance, HDB Financial Services were traded the most on the bourses.

In the primary market of corporate bonds, the Federal Bank raised funds through its first infrastructure bonds issuance of the financial year. The bank raised INR 15 billion through bonds maturing in 10-years at a coupon of 7.76%. The demand for the bonds was said to be from pension funds and insurance companies. "They got good levels for 'AA+' paper," a dealer at a private sector bank said.

Cholamandalam Investment and Finance Co. also tapped the market to raise funds through 10-year bonds. The non-banking financier raised INR 11 billion at a coupon of 8.50%. 

On Monday, Indian Railway Finance Corp. Ltd has invited bids to raise up to INR 30 billion through bonds maturing in 15 years. Kalpataru Projects International Ltd. also plans to raise INR 2 billion through unsecured bonds maturing in three years, while Tapir Constructions has invited bids to raise INR 750 million through reissuance of bonds maturing on Jan. 18, 2027. 

According to sources, after a slowdown in fundraising in the last few weeks, several public sector companies and non-banking financial companies are exploring market rates to raise funds through corporate bonds.

On Thursday, Informist exclusively reported that Power Finance Corp and National Housing Bank were in discussions with arrangers to raise funds through bonds next week. Indian Oil Corp. is also expected to raise funds through corporate bonds before the end of December, sources told Informist.

UDAY BONDS

In the secondary market, Punjab's Ujwal DISCOM Assurance Yojana bonds worth INR 2.50 million, maturing in 2028, were traded at a weighted average yield of 6.9953%, data from the Reserve Bank of India's Negotiated Dealing System–Order Matching System showed.

BENCHMARK LEVELS FOR CORPORATE BONDS:

End

Edited by Akul Nishant Akhoury

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