India Corporate Bonds
Requirement-based trading keeps yields steady
This story was originally published at 19:20 IST on 8 January 2025
Register to read our real-time news.Informist, Wednesday, Jan. 8, 2025
By Vaishali Tyagi
MUMBAI – Yields on corporate bonds ended steady in the secondary market Wednesday, after falling 1-2 basis points on Tuesday, because most market participants limited their activity to meeting basic portfolio requirements, dealers said. The market activity is expected to be subdued in the near term, they said.
"Today's market was dull, with some mutual funds attempting to offload shorter-term paper, but barely anyone was there to buy and majorly need-based deals were executed," a fund manager at a mid-sized mutual fund house said.
Merchant bankers believe that some mutual funds are choosing to hold onto cash reserves in expectation of better opportunities in the near future and hence they are selling bonds.
The market saw some selling from a few mutual funds primarily in three- and five-year tenures, dealers said. A handful of insurance companies and pension funds were actively trading longer-tenure papers on both the buy and sell sides, they added. Banks remained on the sidelines.
Lack of major participation weighed on the trade volume, with deals aggregating to only INR 42.14 billion being recorded on the National Stock Exchange and BSE combined at 1530 IST, as against INR 101.23 billion on Tuesday.
Papers issued by the National Bank for Agriculture and Rural Development, Piramal Capital Housing Finance, REC, HDFC Bank, Grasim Industries, MSRDC Sea Link, LIC Housing Finance, Power Finance Corp., Indian Oil Corp., SMFG India Credit Co., and NTPC were traded most on exchanges.
Market participants expect current yields in the secondary market to hold steady, unless some significant event takes place. "The current market dynamics are stable, with most participants and traders making need-based bets keeping the yield in a confined range," a dealer at a mid-sized brokerage firm said.
Investors are also keeping an eye on the minutes of the US Federal Reserve's December meeting, which are set to be released early Thursday. However, they do not expect the Fed's minute to have a major impact on the yields of corporate bonds in the secondary market.
In the primary market, activity remained subdued. On Thursday, Athena Global Technologies has invited bids to raise INR 1.5 billion through bonds maturing in November 2028. A flurry of bond issuances is expected from state-owned banks and public sector companies in the coming days, as they have to meet their funding requirements, dealers said.
UDAY BONDS
None of the Ujjwal DISCOM Assurance Yojana bonds were traded in the secondary market on Wednesday, according to the Reserve Bank of India's Negotiated Dealing System–Order Matching System.
BENCHMARK LEVELS FOR CORPORATE BONDS:
TENURE | WEDNESDAY | TUESDAY |
Three-year | 7.50-7.52% | 7.49-7.52% |
Five-year | 7.44-7.46% | 7.43-7.45% |
10-year | 7.22-7.24% | 7.21-7.24% |
End
Edited by Ashish Shirke
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