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Informist, Tuesday, Jan. 7, 2025

By Ashna Mariam George 

MUMBAI – A slight fall in the yields on government securities led to a marginal fall in the yields on corporate bonds across tenures on Tuesday, dealers said. During the day, yield on the benchmark 10-year government bond fell by 2 basis points after the Reserve Bank of India announced buyback of five gilts worth INR 250 billion at an auction on Thursday and revival in bond purchases by foreign banks, market participants said.

"The corporate bond market was fairly robust today, yields were 1-2 bps lower across tenures, reacting largely to g-secs (government securities), which moved around 2.0-2.5 bps," a dealer at a mid-sized private sector bank said. "In the morning there was strong movement in g-secs, now it has settled almost flat (compared to Monday's level)." Yield on the 10-year benchmark 6.79%, 2034 government security ended at 6.7483%, unchanged from Monday's closing level, as the first advance estimate for India's GDP growth in 2024-25 (Apr-Mar), released at 1600 IST, was in line with market expectations.

According to the first advance estimate released by the statistics ministry on Tuesday, India's GDP growth is estimated to moderate to a four-year low of 6.4% in the current financial year ending March. "The GDP data came broadly around market expectations and there were no real surprises," the dealer quoted above said.

The data failed to make a solid case for rate cuts by the RBI's Monetary Policy Committee in February, market participants said. "Now we don't expect a rate cut until the April meeting, and OMO (open market operations) purchase can support the market till March end," a dealer at a mid-sized brokerage firm said. In the week ended Dec. 27, the RBI bought INR 200 million worth of bonds in the open market, its first purchase through screen-based open market operations since the week ended Jul. 19.

However, market participants are still divided on a rate cut by the central bank. "GDP is concerning, growth is concerning, and tax collections are not that robust to further pause or not cut rates, so there are still risks," a fixed-income fund manager at a mid-sized mutual fund house said.

Trade volume picked up in the secondary market, with deals aggregating to INR 101.23 billion being recorded on the National Stock Exchange and BSE combined, compared with INR 71.04 billion on Monday. Mutual funds and banks were active on both buying and selling sides, dealing in papers maturing in shorter tenures, dealers said. A couple of insurance companies traded in longer-tenure papers, they added.

Bonds of REC, HDFC Bank, LIC Housing Finance, Cholamandalam Investment and Finance Co., Power Finance Corp., Telangana State Industrial Infrastructure Corp., National Bank for Agriculture and Rural Development, SMFG India Credit Co., Small Industries Development Bank of India, Shriram Finance, and HDB Financial Services were traded the most on the bourses.

In the primary market, Bajaj Housing Finance raised INR 27.75 billion by reissuing two bonds of different maturities. The company set a yield of 7.75% on the reissuance of its bond maturing on Mar. 20, 2028, and accepted bids aggregating to INR 15.75 billion. The home financier set a yield of 7.5850% on the reissuance of its bond maturing on Oct. 4, 2034, and accepted bids aggregating to INR 12 billion.

Merchant bankers believe there will be a flurry of bond issuances by state-owned banks and public sector companies to meet their funding requirements. 

UDAY BONDS

In the secondary market, Punjab's Ujwal DISCOM Assurance Yojana bonds worth INR 50.00 million, maturing on Mar. 30, 2025, were traded at a weighted average yield of 7.1067%, data from the Reserve Bank of India's Negotiated Dealing System–Order Matching System showed.

BENCHMARK LEVELS FOR CORPORATE BONDS:

End 

Edited by Ashish Shirke

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