India Corporate Bonds
Yields steady ahead of CPI data; primary mkt in focus
This story was originally published at 19:47 IST on 12 December 2024
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By Ashna Mariam George
MUMBAI – Yields on corporate bonds in the secondary market ended steady Thursday as investors refrained from placing large bets ahead of India's CPI inflation for November, dealers said. "The market was overall sidewise (ahead of the release of CPI data) and the number has come below market expectation," a dealer at a mid-sized private bank said. "Since the corporate bond market is slightly illiquid now, the impact of the data will take some time."
On Thursday, secondary market deals aggregating to INR 85.34 billion were recorded on the National Stock Exchange and BSE combined, compared to INR 70.10 billion Wednesday. A few public-sector banks were active on both the buying and selling sides, while mutual funds were active on the buying side, dealers said. "There was some activity in the market, and it was mainly concentrated in the mid-segment, which is paper maturing in 3-5 years, ...but the levels were more or less similar to yesterday's (Wednesday's)," a dealer at a mid-sized brokerage said.
Paper issued by Fedbank Financial Services Ltd., REC Ltd., HDFC Bank, LIC Housing Finance Ltd., Dvara Kshetriya Gramin Financial Services Pvt. Ltd., National Bank for Agriculture and Rural Development, Small Industries Development Bank of India, Sundaram Finance Ltd., and HDB Financial Services Ltd. were traded the most on exchanges Thursday.
India's CPI inflation moderated to 5.48% in November from a 14-month high of 6.21% in October, data released Thursday by the National Statistical Office showed. The CPI inflation for November was below consensus expectations. According to an Informist poll of 14 economists, the headline inflation rate was seen at 5.6% in November.
Market participants said a fall in inflation might prompt the Reserve Bank of India's Monetary Policy Committee to cut the policy rate at its next meeting in February. "The new RBI governor has hinted at the need to look after growth. If inflation is under control, there will be a rate cut in the near future," the dealer quoted above said. "The demand from investors for corporate bonds will increase until a rate cut."
While secondary market activity was subdued Thursday, participants were concentrated in the primary market, dealers said. The primary market saw issuances from a few marquee issuers. Indian Railway Finance Corp. Ltd. raised INR 23.45 billion through bonds maturing in 10 years at a coupon of 7.09%. The coupon was slightly lower than the market's expectation of 7.10-7.15% level.
"IRFC tapped the market after a long time, and overall in the primary market, rates for longer tenure paper are 10-15 basis points lower than in the secondary market, see PFC (Power Finance Corp. Ltd.) for example," said a senior official at a mid-sized broking firm. "So, getting this rate shows robust demand for longer tenure paper, especially from investors like EPFO (Employees' Provident Fund Organistion) and LIC (Life Insurance Corp. of India Ltd.)."
Power Finance Corp. Monday raised INR 32 billion through bonds maturing on Jan. 16, 2040, at a coupon of 7.11%, and INR 30.52 billion through another set of bonds maturing on Jan. 15, 2035, at a coupon of 7.10%.
Frequent issuer NABARD also tapped the market to raise INR 48.64 billion Thursday through bonds maturing on Apr. 29, 2030, at a coupon of 7.40%. The issue got a coupon in line with the market's expectation of 7.38-7.40% range. Banks and mutual funds were the major investors in the issue, dealers said.
On Friday, Mumbai Urja Marg Ltd. plans to raise INR 24.50 billion through unsecured bonds maturing on Sept. 30, 2038. Kosamattam Finance Ltd. will also tap the market to raise INR 500 million through bonds maturing in June 2026.
UDAY BONDS
No Ujjwal DISCOM Assurance Yojana bonds were traded in the secondary market Thursday, according to the Reserve Bank of India's Negotiated Dealing System–Order Matching System.
TENURE | THURSDAY | WEDNESDAY |
Three-year | 7.46-7.48% | 7.46-7.49% |
Five-year | 7.38-7.41% | 7.39-7.42% |
10-year | 7.24-7.29% | 7.24-7.28% |
End
Edited by Rajeev Pai
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