India Corporate Bonds
Yields marginally up as MFs sell papers; volume low
This story was originally published at 19:54 IST on 13 December 2024
Register to read our real-time news.Informist, Friday, Dec. 13, 2024
By Ashna Mariam George
MUMBAI – Yields on corporate bonds rose by 3-4 basis points in the secondary market on Friday because of selling pressure from mutual funds. As the deadline for advance tax payments approaches, mutual funds are facing redemption pressure, prompting them to sell their corporate bond holdings, dealers said.
"Yields are a few basis points up (compared to Thursday's levels) across tenures due to the MFs (mutual funds) redemption pressure given advance tax payments and quarter-ending...there is also lack of liquidity in the system," a dealer at a mid-sized brokerage firm said.
The deadline for the third instalment of advance tax payment for the financial year 2024-25 (Apr-Mar) is Sunday. Outflows for advance tax payments are expected to start from Friday, dealers said. About INR 1.25 trillion-INR 1.50 trillion is expected to be drained from the banking system on account of advance tax payments, dealers said. According to data on the Reserve Bank of India's website, liquidity surplus in the banking system widened slightly to INR 643.11 billion on Thursday from INR 471.29 billion on Wednesday.
Trade volume in secondary market was down, with deals aggregating to only INR 37.22 billion being recorded on the National Stock Exchange and BSE combined, compared to INR 85.34 billion Thursday. Banks were buyers in the shorter-tenure segment, while pension funds and insurance companies bought longer tenure papers, dealers said.
Bonds issued by REC, HDFC Bank, Hella Infra Market, DME Development, Power Finance Corp., Hinduja Leyland Finance, National Bank for Agriculture and Rural Development, Bajaj Finance, Shriram Finance, and Food Corp. of India were traded the most on the exchanges Friday.
In the primary market, Mumbai Urja Marg raised INR 24.50 billion through unsecured bonds maturing on Sept. 30, 2038, at a quarterly coupon of 8.10%. "They got a fairly good coupon considering it is an 'AA+' rated paper...the decent participation shows investor demand for longer-tenure papers," a dealer at a mid-sized pension fund house said. The issue garnered major demand from pension funds and a few mutual funds, dealers said.
Embassy Office Parks REIT raised INR 10 billion through five-year bonds at a fixed coupon of 7.73%, payable quarterly.
On Monday, Nuclear Power Corp. of India will tap the market to raise up to INR 46 billion through bonds maturing in 15 years. Earlier this week, Informist exclusively reported that the state-owned power giant was planning to come back to the bond market to raise up to INR 46 billion through bonds maturing in 15 years.
UDAY BONDS
None of the Ujjwal DISCOM Assurance Yojana bonds were traded in the secondary market Friday, according to the Reserve Bank of India's Negotiated Dealing System–Order Matching System.
TENURE | FRIDAY | THURSDAY |
Three-year | 7.50-7.52% | 7.46-7.48% |
Five-year | 7.40-7.43% | 7.38-7.41% |
10-year | 7.26-7.29% | 7.24-7.29% |
End
Edited by Ashish Shirke
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