India Corporate Bonds
Need-based trading keeps ylds in narrow band; MPC eyed
This story was originally published at 22:13 IST on 3 December 2024
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By Vaishali Tyagi
MUMBAI – Yields on corporate bonds in the secondary market remained in a narrow range on Tuesday, after a 6-7-basis-point decline on Monday. The yields on corporate bonds tracked the rally in government bond yields on Monday post the weaker-than-expected Jul-Sept GDP data. Dealers said traders focused on meeting portfolio requirements ahead of the Reserve Bank of India's Monetary Policy Committee meeting outcome due Friday and traded mostly in short-term papers.
The trading volumes were satisfactory with most activity concentrated in shorter-tenure papers, a dealer at a mid-sized brokerage firm said. "Traders are primarily engaging in need-based trading, and shorter-tenure papers are currently the most liquid, while longer-tenure papers are experiencing low liquidity."
Dealers said traders abstained from taking aggressive bets ahead of the Monetary Policy Committee meeting outcome on Friday. "There is almost negligible possibility of a rate cut at least in this (December) monetary policy meeting as inflation still remains high, but we are expecting a cut in the cash reserve ratio to maintain liquidity in the system," a dealer at a mid-sized brokerage firm said. Traders expect the MPC to ease the cash reserve ratio by at least 25 basis points from the current 4.50%.
In the secondary market for corporate bonds, mutual funds and banks were mainly active on 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 112.35 billion were recorded on the National Stock Exchange and BSE combined, compared with INR 121.31 billion on Monday.
Papers issued by the Bank of Baroda, Bank of India, Astrum Value Homes, LIC Housing Finance, Godrej Industries, National Bank For Agriculture And Rural Development, Bajaj Finance, Can Fin Homes, Summit Digitel Infrastructure, HDFC Credila Financial Services, Small Industries Development Bank of India were traded the most on exchanges.
On Tuesday, activity in the primary market remained low. On Wednesday, LIC Housing Finance plans to raise up to INR 25 billion through bonds maturing on May 29, 2034. L&T will also tap the market on Wednesday to raise up to INR 15 billion through 10-year unsecured bonds. Equitas Finance has also invited bids to raise INR 5 billion through bonds maturing on Dec. 5, 2030.
With uncertainty about interest rates in the short-term, leading issuers are taking a cautious approach. As a result, issuances are slightly down. However, market activity is expected to pick up once the monetary policy decision is announced.
UDAY BONDS
No Ujjwal DISCOM Assurance Yojana bonds were traded in the secondary market on Thursday, according to the Reserve Bank of India's Negotiated Dealing System–Order Matching System.
TENURE | TUESDAY | MONDAY |
Three-year | 7.46-7.48% | 7.47-7.49% |
Five-year | 7.41-7.43% | 7.42-7.44% |
10-year | 7.25-7.27% | 7.24-7.26% |
End
Edited by Akul Nishant Akhoury
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