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Informist, Thursday, Jan. 30, 2025

By Ashna Mariam George 

MUMBAI – Yields on corporate bonds maturing in three years fell by 1-2 basis points in the secondary market on Thursday due to active buying by mutual funds, dealers said. However, yields on five-year and 10-year papers remained steady as shorter-tenure papers are more attractive, they added. 

In the secondary market of corporate bonds, while mutual funds were buying on Thursday, banks were active on the selling side. Improved participation from mutual funds led to higher trade volume. On Thursday, deals aggregating to INR 144.83 billion were recorded on the National Stock Exchange and BSE combined, compared with INR 104.34 billion on Wednesday.

Papers issued by Larsen And Toubro, HDFC Bank, Sammaan Capital, Telangana State Industrial Infrastructure Corp., National Bank For Agriculture And Rural Development, Export Import Bank of India, National Housing Bank, ICICI Prudential Life Insurance Co., Aditya Birla Housing Finance, and NHPC were traded the most on exchanges on Thursday. 

"They (mutual funds) might be looking at liquidity itself and taking some calls to buy in the two-to-three year segments," a dealer at a mid-sized brokerage firm said. "The market was active in this segment and the longer segment was quiet today (Thursday)."

On Wednesday, the net liquidity injected by the RBI--a proxy for systemic liquidity conditions--rose slightly to INR 2.56 trillion from INR 2.51 trillion on Tuesday. Market participants expect the liquidity deficit to ease slightly in the near-term. The Reserve Bank of India bought INR 200.20 billion worth of bonds, against the notified amount of INR 200 billion, through an open market auction on Thursday. On Friday, the RBI will inject liquidity into the banking system by conducting a dollar/rupee buy/sell swap of $5 billion, for a six-month tenor.

"OMO (open market operations) is a temporary measure and might ease liquidity in the near-term," a dealer at another mid-sized brokerage firm said. "We are not expecting another OMO till March, and now everyone is waiting for the budget."

Market participants expect the government to bring down its fiscal deficit and net market borrowing in the Union Budget for 2025-26 (Apr-Mar), scheduled on Saturday. "Broadly, the market expects the fiscal deficit to be around 4.3-4.5% (of GDP) levels, and we are moving towards fiscal consolidation," a fund manager at a mid-sized mutual fund house said. According to an Informist poll of 24 economists, the government is expected to announce a fiscal deficit target of 4.5% of GDP for FY26. 

"Borrowing numbers will also go down, and more or less, the market has priced in the lower number," the fund manager said. The Union Budget may cut the government's estimated net borrowing in FY26 to INR 11.20 trillion from INR 11.63 trillion this year, according to an Informist poll of 18 economists, fund managers, and treasury heads. 

Meanwhile, in the primary market of corporate bonds, Muthoot Finance raised INR 20.75 billion through bonds maturing on Jan. 31, 2028, at a fixed coupon of 8.65%. In the coming months, more primary issuances are expected from public and private sector banks and non-banking financial companies, dealers said. 

UDAY BONDS

In the secondary market, Ujwal DISCOM Assurance Yojana bonds aggregating INR 44.40 million were traded at a weighted average yield of 7.1250-7.1325%, data from the Reserve Bank of India's Negotiated Dealing System–Order Matching System showed on Thursday.

* INR 26.50 million of Tamil Nadu's 2026 bonds were traded at 7.1304% 

* INR 11.00 million of Rajasthan's 2026 bonds were traded at 7.1325%

* INR 6.90 million of Telangana's 2032 bonds were traded at 7.1250%

BENCHMARK LEVELS FOR CORPORATE BONDS:

End

Edited by Deepshikha Bhardwaj

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