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Informist, Monday, Jan. 13, 2025

By Ashna Mariam George 

MUMBAI – The corporate bond market started the week on a higher note, with yields on bonds surging by 5-7 basis points across tenures, tracking an upward movement in government securities, dealers said. Yield on the 10-year benchmark government security rose by 5-6 bps on Monday, tracking a spike in the 10-year US Treasury note, following a strong US jobs data and a rise in crude oil prices.

Oil prices rose to an over 4-month high on Monday, after US President Joe Biden announced fresh sanctions on Russia, aiming to hit every stage of Moscow's oil production and distribution. At 1753 IST, the March Brent Crude contract on the Intercontinental Exchange was $81.15 per barrel, compared with its previous close of $79.76 per barrel on Friday.

Further, a fall in the rupee to a fresh record low pushed government bond yields higher, consequently leading to a rise in corporate bond yields. The rupee fell the most in nearly 2 years on Monday, to end at a record closing low of 86.5750 a dollar due to a surge in the dollar index. The dollar index rose after Friday's US non-farm payrolls data showed a strong and resilient US labour market, signalling a slow pace of monetary policy easing this year. A strengthening dollar index pulled the rupee to its lifetime low, and the fast-depreciating currency would reduce foreign investors' dollar-denominated returns, dealers said.

"There was a lot of pressure on the rupee on an overnight basis from Friday. Also, another main factor (for rise in government bond yields) is the tight liquidity in the system–-liquidity is still in deficit of (INR) 2 trillion, which is quite high and there are outflows from equity as well," a fixed-income fund manager at a mid-sized mutual fund house said. "The corporate bond market also equally replicated today's g-sec (government security) momentum across tenures." On Friday, the net liquidity injected by the RBI--a proxy for systemic liquidity conditions--rose to INR 2.25 trillion from INR 2.01 trillion on Thursday.

"The liquidity crunch, crude oil price, and rupee movement were all factored in the yield movement in corporate bonds," a dealer at a mid-sized brokerage firm said. "Now, rate cut expectations (by the Reserve Bank of India) are dim in February."

India's CPI inflation for December was another key data that the market awaited for. The data, released at 1400 IST, did not surprise the market as it was largely in line with market expectations, dealers said. India's CPI inflation moderated to a four-month low of 5.22% in December from 5.48% in November. According to an Informist poll, headline inflation was seen at 5.3% in December.

In the secondary market, trade volumes were slightly up with deals aggregating to INR 97.39 billion being recorded on the National Stock Exchange and BSE, against INR 62.98 billion on Friday. Mutual funds were the buyers and sellers of papers with maturities below five years, while banks, insurance companies and pension funds were less active, dealers said.  

Papers issued by REC, HDFC Bank, MSRDC Sea Link, Cholamandalam Investment And Finance Co., Power Finance Corp., Telangana State Industrial Infrastructure Corp., and Bajaj Finance, were traded most on exchanges.

In the primary market on Monday, REC raised INR 22.97 billion through bonds maturing on Jan. 15, 2035 at a coupon of 7.20%. The issue had a base size of INR 7 billion and a greenshoe option of INR 33 billion. Tata Capital Housing Finance also raised INR 9.05 billion through bonds maturing on Jan. 14, 2030, at a fixed coupon of 7.73%. 

UDAY BONDS

In the secondary market, Ujwal DISCOM Assurance Yojana bonds aggregating INR 73.30 million were traded at a weighted average yield of 7.1676-7.2204%, data from the Reserve Bank of India's Negotiated Dealing System–Order Matching System showed.

* INR 50.00 million of Haryana's July 2026 bonds were traded at 7.1676%

* INR 10.00 million of Chhattisgarh's March 2029 bonds were traded at 7.2204%

* INR 8.10 million of Telangana's March 2029 bonds were traded at 7.2201%

* INR 5.20 million of Tamil Nadu's February 2031 bonds were traded at 7.2107%

BENCHMARK LEVELS FOR CORPORATE BONDS:

End

Edited by Akul Nishant Akhoury

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