India Corporate Bonds
Yields steady on lack of fresh triggers; volume up
This story was originally published at 19:45 IST on 2 January 2025
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By Sachi Pandey
MUMBAI – Yields on corporate bonds ended steady on Thursday due to a lack of fresh domestic and global triggers, dealers said. However, trade volume in the secondary market rose as participation improved as compared to Wednesday.
In the secondary market, some banks and corporates sold papers, while some mutual fund houses bought those papers, dealers said. "Mutual funds have received some flows, so they are buying in the market currently, especially the shorter tenure paper," a dealer at a mid-sized brokerage firm said.
Deals aggregating INR 96.27 billion were recorded on the National Stock Exchange and BSE combined, against only INR 36.61 billion in the previous trading session. "Market activity has improved compared to yesterday (Wednesday). Participants are returning from their New Year breaks, and we expect participation to improve further from Monday," said a fixed income fund manager at a mid-sized mutual fund house.
Furthermore, market experts believe that the widening spreads between corporate bonds and government securities will attract investors to the bond market. "Spreads are at 3-6 month highs, primarily due to liquidity issues. The strengthening dollar and dollar outflows are also contributing to pressure in the shorter end of the market," said a fund manager at a mid-sized mutual fund house.
On Thursday, the spreads between the 10-year benchmark government security and the 10-year benchmark National Bank for Agriculture and Rural Development paper stood at 33-35 basis points, while spreads between five-year benchmark papers were 64-70 basis points.
In the secondary market, papers issued by REC, HDFC Bank, LIC Housing Finance, Punjab National Bank, Bharti Telecom, Small Industries Development Bank of India, and NABARD were traded across various tenures.
In the primary market, Indian Oil Corp. raised INR 25 billion through bonds maturing in five years at a coupon of 7.25%. The issue was fully subscribed. "There was a tail of around 3 to 5 basis points in the coupon. I heard that the oil and gas limits of some of the banks were full, so that's why we got a tail in this paper. But I think as time passes it will get distributed and come back to its fair level in the secondary market," the fund manager quoted above said.
On Nov. 7, Informist reported exclusively that Indian Oil Corp. is likely to tap the bond market with bonds maturing in five years by the end of December.
Market participants expect the primary market to witness increased activity in the coming days. "The primary market participation is currently limited due to the holidays, but it will start slowly and steadily in a couple of days," said a market expert.
On Friday, Shriram Finance invited bids to raise up to INR 10 billion through five-year bonds.
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.
BENCHMARK LEVELS FOR CORPORATE BONDS:
TENURE | THURSDAY | WEDNESDAY |
Three-year | 7.52-7.55% | 7.53-7.55% |
Five-year | 7.46-7.49% | 7.46-7.49% |
10-year | 7.22-7.25% | 7.23-7.26% |
End
Edited by Deepshikha Bhardwaj
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