India Corporate Bonds
Ylds steady on need-based trading , low participation
This story was originally published at 19:46 IST on 23 December 2024
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By Ashna Mariam George
MUMBAI – Yields on corporate bonds ended steady across tenures in the secondary market Monday as market participants limited their activity to only requirement-based trading, dealers said. Liquidity deficit in the banking system and lack of participation ahead of Christmas holidays prompted market participants to remain on the sidelines, dealers said.
"There is hardly any trade in the secondary market, whatever trade happens is only for the purpose and no one is taking any fresh positions due to lack of liquidity," a fund manager at a mid-sized mutual fund house said. "Liquidity remains to be tight, and the market is expected to be on the sidelines till there is a clarity on liquidity...(Reserve Bank of India's) CRR (cash reserve ratio) cut will take some time to show, especially due to a lot of outflows."
According to RBI data, the liquidity deficit was at INR 1.88 trillion on Sunday against INR 1.91 trillion on Saturday. The liquidity deficit rose to the highest level seen since May. 26 due to outflows of goods and services tax.
In December's monetary policy committee meeting, the RBI lowered the cash reserve ratio by 50 bps to 4.00% of net, demand and time liabilities in two equal tranches. The cash reserve ratio was cut by 25 basis points effective from the fortnight started Dec. 14, and by another 25 bps from the fortnight starting Dec. 28.
Market participants also said activity was limited due to subdued participation due to Christmas week. "Market was not very active and only few trades were happening because it's holiday week and most people are on leave," a dealer at a mid-sized brokerage firm said.
On Monday, deals aggregating to INR 87.59 billion were recorded on the National Stock Exchange and BSE combined, as compared to INR 59.05 billion on Friday. Banks and mutual funds were active in both buying and selling sides, dealing in papers across tenures, dealers said.
Papers issued by REC, Grasim Industries, Nuclear Power Corp. of India, Export Import Bank of India, Axis Wind Farms, Small Industries Development Bank of India, National Housing Bank, and ICICI Prudential Life Insurance Co., were traded the most on exchanges on Monday.
On the other hand, the primary market was quite active on Monday with state-owned entities tapping the market to raise funds. Power Grid Corp. of India raised INR 39.75 billion through bonds maturing in 10 years at a coupon of 7.12%. Another public sector entity, Housing and Urban Development Corp. raised INR 12.30 billion through bonds maturing in 10 years at a coupon of 7.12%.
"There was super demand for both issuances, as they are rare issuers...aggressive buying from insurance (companies) and EPFO (Employees' Provident Fund Organisation) brought the levels lower than expected (levels of 7.15%)," a fixed-income dealer at another mid-sized mutual fund house said.
On Tuesday, Indian Railway Finance Corp. will tap the market to raise up to INR 30 billion by issuing bonds maturing in 10 years. Market participants expect the coupon on the issue to be in the range of 7.14-7.17%.
UDAY BONDS
In the secondary market, Ujwal DISCOM Assurance Yojana bonds aggregating to INR 903 million were traded at a weighted average yield of 6.8574-7.1017%, data from the Reserve Bank of India's Negotiated Dealing System–Order Matching System showed.
* INR 700 million of Haryana's June 2025 bonds were traded at 6.8577%
* INR 203 million of Rajasthan's June 2025 and June 2026 bonds were traded at 6.8574-7.1017%
TENURE | MONDAY | FRIDAY |
Three-year | 7.58-7.60% | 7.57-7.60% |
Five-year | 7.48-7.50% | 7.46-7.49% |
10-year | 7.25-7.27% | 7.26-7.28% |
End
Edited by Deepshikha Bhardwaj
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