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Informist, Tuesday, Dec. 17, 2024

By Ashna Mariam George 

MUMBAI – Yields on corporate bonds ended steady across tenures in the secondary market on Tuesday as activity was concentrated in the primary market, dealers said. "The secondary market remained lacklustre today (Tuesday) and everyone focused on the primary market, which sees a pickup in activity," a fund manager at a mid-sized mutual fund house said. 

Apart from this, the movement in yield was restricted as the market awaited the US Federal Open Market Committee's decision on interest rates early on Thursday, dealers said. "The market has been kind of looking for cues basically, and the Fed (US Federal Open Market Committee) is expected to give a proper direction...based on that, market is moving in the sidelines now," a fund manager at another mid-sized mutual fund house said. "More than 90% of the market expects a 25-basis-point rate cut which is already priced in...important to note is what the Fed will signal (about future rate cuts)...and after that we will get a trigger or guidance."

However, market participants do not expect the FOMC's decision to have a major impact on yields on corporate bonds in the secondary market. "Our market will almost be flat, because everything is already factored in...maybe there will be a 1-2 bps movement here and there," a dealer at a mid-sized brokerage firm said. 

At 1750 IST, the CME FedWatch tool showed a 97.1% chance of a 25-basis-point cut, which would lower the federal funds rate to 4.25-4.50% from the current 4.50-4.75%. 

On Tuesday, the secondary market saw deals aggregating to INR 115.85 billion being recorded on the National Stock Exchange and BSE combined, compared to INR 55.22 billion on Monday. Banks and mutual funds were active on both the buying and selling sides, dealing in papers with maturity below five years, dealers said. A handful of insurance companies and pension funds were on the buying side, they added. 

Bonds issued by REC, HDFC Bank, Indian Railway Finance Corp., LIC Housing Finance, Power Finance Corp., Telangana State Industrial Infrastructure Corp., National Bank For Agriculture And Rural Development, Export Import Bank of India, National Housing Bank, and Trust Investment Advisors were traded the most on exchanges on Tuesday.

On the other hand, the primary market was quite active on Tuesday, with state-owned entities raising funds through their respective bond offerings. National Housing Bank raised INR 39 billion through unsecured bonds maturing on Oct. 3, 2031, at a coupon of 7.20%. "7.20% is a genuine level for a 10-year paper and the issue was well bid across. The issuer was also ready to give a higher coupon than the initial expectation of around 7.15%," the first fund manager quoted earlier said. According to dealers, insurance companies and mutual funds were the major investors in the issue. 

Another public sector entity, REC, raised INR 21.95 billion on Tuesday through two bonds. The company raised INR 16.20 billion through bonds maturing on Apr. 30, 2035 at a coupon of 7.10%. The coupon for this issue was along market expectations, dealers said.

The company also raised INR 5.75 billion through the reissuance of its bonds maturing on Nov. 30, 2039 at a yield of 7.1494%. However, market participants said the coupon was slightly higher than expected levels of 7.10%. "There was not enough demand for lower levels...REC wanted a better yield around 7.10%, and they did not accept the full amount," a treasury manager at a mid-sized public sector bank said. Insurance companies were the major investors in the issue, dealers said. 

The primary market is expected to witness robust activity on Wednesday, with bidding scheduled for over INR 70 billion worth of issues. India Infrastructure Finance Co. plans to raise up to INR 30 billion through two bonds of different maturities. The company plans to raise up to INR 20 billion through bonds maturing in 10 years. According to market participants, the issue is expected to get a coupon in the range of 7.20-30%. 

The company also plans to raise up to INR 10 billion through bonds maturing on Mar. 20, 2028. Market participants expect the coupon for the issue to be in the range of 7.47-7.50%. 

Punjab & Sind Bank will also tap the market on Wednesday with its maiden infrastructure bonds maturing in 10 years. The lender plans to raise up to INR 30 billion through the issue. On Dec. 2, Informist had reported exclusively that Punjab & Sind Bank was set to raise up to INR 30 billion through infrastructure bonds after the Monetary Policy Committee's meeting. Market participants expect the coupon on the infrastructure bonds to range between 7.55% and 7.60%. 

ICICI Prudential Life Insurance Co. plans to raise up to INR 14 billion on Wednesday through bonds maturing in 10 years. 

UDAY BONDS

None of the Ujjwal DISCOM Assurance Yojana bonds were traded in the secondary market on Tuesday, according to the Reserve Bank of India's Negotiated Dealing System–Order Matching System.

End

Edited by Avishek Dutta

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