India Corporate Bonds
Yields flat as dull momentum continues; volumes down
This story was originally published at 19:25 IST on 3 January 2025
Register to read our real-time news.Informist, Friday, Jan. 3, 2025
By Sachi Pandey
MUMBAI – Activity in the corporate bond market continued to experience a lull on Friday, keeping yields flat, with investors adopting a cautious approach in the absence of major domestic and global triggers. "It's still early days in the new year, and market participants are taking their time to gauge the direction of the market," said a dealer at a mid-sized brokerage firm.
In the secondary market, buying was seen from some banks, while mutual funds were active on both the buying and selling sides, dealers said. A few foreign banks were also seen actively participating in the market as they opened up their portfolios in 2025 after the year-end lull due to the annual closing of accounts. However, volume slipped in the secondary market, with deals aggregating to only INR 63.61 billion being recorded on the National Stock Exchange and BSE combined, compared with INR 96.27 billion on Thursday.
Bonds issued by Mahindra and Mahindra Financial Services, HDB Financial Services, Small Industries Development Bank of India, Muthoot Fincorp, Export Import Bank of India, IIFL Home Finance, Bharti Telecom, National Bank for Agriculture and Rural Development, Telangana State Industrial Infrastructure Corp., Power Finance Corp., LIC Housing Finance, Reliance Industries, National Bank for Financing Infrastructure and Development, State Bank of India, and REC were traded the most on exchanges on Friday.
As the corporate bond market continues to experience a lull, market participants are eagerly awaiting a trigger to revitalise activity. One potential trigger could be the Reserve Bank of India's intervention on liquidity in the banking system. Despite a slight narrowing of the liquidity deficit, market participants remain concerned, with one fund manager noting, "The liquidity is still in negative in the first week of the month. I think some measure by RBI is required now to control this."
According to the RBI data, the liquidity deficit narrowed to INR 674.45 billion on Thursday, compared with INR 1.05 trillion on Wednesday. This reduction was largely due to government inflows for month-end spending, which added around INR 1.50 trillion–INR 1.60 trillion to the banking system.
Another key aspect being closely watched by money market participants is the widening spread between corporate bonds and government securities. The fund manager quoted earlier noted, "The spread is widening and can now go back to normal only if the liquidity scenario gets under control".
On Friday, the spreads between the 10-year benchmark government security and the 10-year benchmark National Bank for Agriculture and Rural Development paper stood at 30-35 basis points, while spreads between five-year benchmark papers were 65-70 basis points.
In the primary market of corporate bonds, Shriram Finance raised funds through bonds today. The non-banking financier raised INR 5.10 billion through bonds maturing in five years at a fixed coupon of 8.9043%.
Arka Fincap Ltd. also tapped the bond market today to raise INR 500 million through bonds maturing on Jan. 5, 2029 at a coupon of 9.38% payable semi-annually. Ambium Finserve Ltd. raised INR 300 million through bonds maturing on Jul. 5, 2026, at a coupon of 10.95%, payable monthly.
UDAY BONDS
No Ujjwal DISCOM Assurance Yojana bonds were traded in the secondary market on Friday, according to the Reserve Bank of India's Negotiated Dealing System–Order Matching System.
BENCHMARK LEVELS FOR CORPORATE BONDS:
TENURE | FRIDAY | THURSDAY |
Three-year | 7.51-7.54% | 7.53-7.55% |
Five-year | 7.46-7.48% | 7.46-7.49% |
10-year | 7.22-7.25% | 7.23-7.26% |
End
Edited by Akul Nishant Akhoury
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