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Informist, Tuesday, Jan. 28, 2025

By Vaishali Tyagi

MUMBAI – Corporate bond yields fell marginally across tenures on Tuesday, tracking a fall in yields on government securities earlier in the day, dealers said. Yields on the government bond opened sharply lower after the Reserve Bank of India announced measures on Monday to infuse durable liquidity in the system. The yield on the benchmark 10-year bond touched 6.6254% during the day, the lowest since Feb. 15, 2022.

The Reserve Bank of India announced measures including open market purchases of gilts worth INR 600 billion through auction in three tranches. The central bank will buy the on-the-run 6.79%, 2034 gilt at the first auction on Thursday.

"Market activity was muted, with only a 1-2 basis point movement on the downside tracking fall in g-sec (government securities)," a dealer at a mid-sized brokerage firm said. "Market participants expect improved liquidity and potential movement in corporate bonds following the RBI's liquidity-infusing measures."

On Monday, the net liquidity injected by the RBI--a proxy for systemic liquidity deficit--was INR 3.10 trillion. Besides the OMO, the RBI also announced a 56-day variable rate repo auction for INR 500 billion and a dollar/rupee buy/sell swap auction of $5 billion to improve liquidity.

In the secondary market on Tuesday, deals aggregating to INR 99.09 billion were recorded on the National Stock Exchange and BSE combined, against INR 89.85 billion on Monday. Mutual funds were active on both buying and selling sides, dealing in shorter tenure papers, dealers said.

A couple of insurance companies and private companies bought longer-tenure papers, but activity remained limited in that segment, they added. "Today's market activity focused on shorter-term bonds, with high volumes in 2026 and 2027 papers, while trading in longer-term bonds above five years was very limited," a fund manager at a mid-sized mutual fund house said.

Papers issued by Larsen & Toubro, Indian Railway Finance Corp., LIC Housing Finance, Cholamandalam Investment And Finance Co., Power Finance Corp., Telangana State Industrial Infrastructure Corp., National Bank For Agriculture And Rural Development, National Housing Bank, and Tata Capital were traded the most on exchanges. 

The primary market activity remained moderate on Tuesday, with companies cumulatively raising over INR 77 billion. National Bank For Agriculture And Rural Development raised INR 50 billion, reissuing Mar. 24, 2028, at a yield of 7.50%. According to the bid book accessed by Informist, the issue received 90 bids aggregating INR 83.59 billion in the range of 7.35-7.58% coupon. "NABARD's cut-off was in line with market expectations. Everyone was expecting the coupon to be somewhere around 7.45-7.52%," a dealer at a mid-sized brokerage firm said.

LIC Housing Finance, raised INR 27.45 billion through bonds maturing on Dec. 11, 2029, at a coupon of 7.66%. 

UDAY BONDS

In the secondary market, Ujwal DISCOM Assurance Yojana bonds aggregating INR 11.00 million were traded at a weighted average yield of 7.1422-7.3304%, data from the Reserve Bank of India's Negotiated Dealing System–Order Matching System showed on Tuesday.

* INR 7.00 million of Telangana's 2025-2028 bonds were traded at 7.1422-7.3304%

* INR 4.00 million of Rajasthan's 2026 bonds were traded at 7.1472-7.1689%

BENCHMARK LEVELS FOR CORPORATE BONDS:

End

Edited by Saji George Titus

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