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Informist, Friday, Jan. 10, 2025

By Ashna Mariam George 

MUMBAI – Yields on three-year corporate bonds ended slightly lower in the secondary market on Friday as selling pressure from mutual funds eased, dealers said. However, yields on bonds maturing in five years and 10 years remained steady as market participants refrained from placing aggressive bets in these segments due to the lack of any new triggers, dealers said.

"There was no selling pressure today (Friday) as the liquidity seemed to have softened," a dealer at a mid-sized brokerage firm said. "Activity was mostly concentrated in shorter tenures, up to one-to-two years paper." Money market rates cooled off slightly as the Reserve Bank of India conducted two variable rate repo operations during the day, dealers said. 

However, market participants said the liquidity will remain in deficit this month unless the Reserve Bank of India intervenes with some durable tool to ease it. "Liquidity has eased a bit after VRR (variable rate repo) but not much, I think this will go on at least till the MPC (Monetary Policy Committee meeting)," a dealer at another mid-sized brokerage firm said. 

Dealers said they are waiting to take cues from the December CPI inflation data, due Monday, the RBI Monetary Policy Committee meeting, and the Union Budget for 2025-26 (Apr-Mar). "Expectations right now is that there is still a rate cut on the cards...the RBI has not cut rates because again they've found inflation troubling, so, basically it makes the next week's inflation numbers to be a critical one to guide the RBI MPC next month," a fixed income fund manager at a mid-sized mutual fund house said. 

According to an Informist poll of 15 economists, India's retail inflation rate has likely moderated to a four-month low of 5.3% in December, from 5.48% in November and 5.69% in December 2023.  

Lack of fresh triggers weighed on the trade volumes in the secondary market. Deals aggregating to INR 62.98 billion were recorded on the National Stock Exchange and BSE combined against INR 95.79 billion on Thursday. Mutual funds were the buyers and sellers of shorter tenure papers, while banks, insurance companies and pension funds stood on the sidelines, dealers said.  

Papers issued by REC, HDFC Bank, MSRDC Sea Link, Power Finance Corp., Indian Oil Corp., Bajaj Finance, PNB Housing Finance, Rajasthan Rajya Vidyut Prasaran Nigam, and Tata Motors Finance were traded most on exchanges.

In the primary market on Friday, National Bank for Agriculture and Rural Development raised INR 44.12 billion through bonds maturing on Mar. 24, 2028 at a coupon of 7.53%. Market participants said the coupon was in line with expectations. On Monday, another frequent issuer, REC, will tap the market to raise INR 40 billion through bonds maturing on Jan. 15, 2035. 

UDAY BONDS

In the secondary market, Ujwal DISCOM Assurance Yojana bonds aggregating INR 186.00 million were traded at a weighted average yield of 7.1552-7.8156%, data from the Reserve Bank of India's Negotiated Dealing System–Order Matching System showed.

* INR 103.00 million of Haryana's March 2025, June 2025, March 2026, and July 2026 bonds were traded at 7.2361-7.7564%

* INR 57.00 million of Rajasthan's June 2025 and March 2026 bonds were traded at 7.2489-7.6315%

* INR 24.00 million of Telangana's March 2025 and March 2026 bonds were traded at 7.2473-7.8156%

* INR 2.00 million of Tamil Nadu's March 2027 bonds were traded at 7.1552%

BENCHMARK LEVELS FOR CORPORATE BONDS:

End

Edited by Tanima Banerjee

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