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Informist, Monday, Feb. 17, 2025

By Sachi Pandey

MUMBAI – Yields on corporate bonds remained in a narrow range in the secondary market on Monday as most participants turned their attention to the primary market, dealers said. "There's nothing new in the secondary market to react to, nothing extraordinary is happening there, so traders have turned their focus to the primary market," said a dealer with a mid-sized brokerage firm.

Power Finance Corp. raised INR 68.35 billion through two bonds of different maturities. The public sector entity raised INR 40 billion through bonds maturing on Apr. 15, 2028 at a coupon of 7.42%. The issue, which was fully subscribed, offered a coupon slightly better than the market's expectations of 7.45-7.50%.

The company also raised INR 28.35 billion through bonds maturing on Jan. 15, 2032 at a coupon of 7.38%. "We saw difficulty in investor demand for the seven-year PFC paper; the bidding was not that deep and they could not take the entire amount. However, there was a lot of bidding for the three-year paper," an assistant vice president of debt capital markets at a mid-sized private sector bank said.

Bank of Maharashtra raised funds through infrastructure bonds maturing in 10 years. The state-owned bank raised INR 16.12 billion at a coupon of 7.70%.

While there was favourable demand for shorter tenure papers of three- to five-year maturity, investor demand for longer term papers of seven to 10-year maturity was remained subdued. The reason for this oversupply of such papers, dealers said. 

"The seven- and 10-year papers are not looking that liquid because there is no investor interest in such papers. Ten year has too much of supply. We are seeing a lot of interest from investors for three- and five-year papers, but they don't want to bid for the seven-year or longer tenure papers," the assistant vice president of debt capital markets quoted above said.

Last week, over INR 370 billion was raised through primary issuances.

A senior fund manager at a large mutual fund house also pointed out that the elevated coupon rates on longer-term bonds were linked to the oversupply of such papers. "The rates on longer-tenure bonds are high because investors have too many options to choose from. Unless the supply slows down, these high rates will likely persist," he noted.

One more factor for the subdued demand is the absence of large investors like provident funds and insurance companies, dealers said.

The secondary market saw deals aggregating to INR 114.65 billion being recorded on the National Stock Exchange and BSE combined, compared to INR 104.39 billion on Friday. "The volume hasn't gone up much. But the trading activity is going on whatever there is, mostly in short-term papers," the senior fund manager said.

Mutual funds were actively selling shorter-tenure bonds and selectively purchasing longer-tenure bonds as part of their routine portfolio churning. Some banks were also seen buying bonds in the secondary market, dealers said.

Papers issued by Small Industries Development Bank of India, National Bank for Agriculture and Rural Development, Telangana State Industrial Infrastructure Corp., Sammaan Capital, Cholamandalam Investment and Finance Co., State Bank of India, Indian Railway Finance Corp., HDFC Bank, REC, Housing and Urban Development Corp., and Mancherial Repallewada Road Pvt. Ltd. were traded the most on the exchanges.

UDAY BONDS

In the secondary market, Ujwal DISCOM Assurance Yojana bonds aggregating INR 5.50 million were traded at a weighted average yield of 7.1740-7.3392%, data from the Reserve Bank of India's Negotiated Dealing System–Order Matching System showed Monday.

* INR 4.50 million of Uttar Pradesh's Jun. 2, 2025 bonds were traded at 7.3392%

* INR 1.00 million of Rajasthan's Mar. 31, 2026 bonds were traded at 7.1740%

BENCHMARK LEVELS FOR CORPORATE BONDS:

End

Edited by Ashish Shirke

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