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Informist, Thursday, Feb. 27, 2025

By Ashna Mariam George 

MUMBAI – Higher-than-expected cut-off on bonds issued by marquee issuers in the primary market pushed up yields on corporate bonds across tenures by 3-7 basis points in the secondary market Thursday, dealers said. The cut-offs for primary issuances of National Bank for Agriculture and Rural Development, Power Finance Corp., and Small Industries Development Bank of India were 5-6 bps higher than market expectations, dealers said.

"The higher-than-expected cut-offs in the primary market clearly shows lack of demand...because of this, primary market levels are putting pressure on yields in secondary space and leading to widening of spreads (between yields on corporate bonds and government securities) as g-secs are only slightly up," a fund manager at a mid-sized mutual fund house said. The yield on 10-year benchmark government bond closed at 6.7086% Thursday against 6.7065 Tuesday.

Market participants said major investors such as pension funds and insurance companies which drive demand for long-term issuances in the primary market are now quiet either due to lack of liquidity in the system or over-supply of new issuances. "Big buyers are missing from the buying space, if they don't come in to the buying mode, then it is going to be a tough quarter for corporates raising money through corporate bonds...this is a troubling sign...large investors do not have funds, it will be challenging for big issuances to sail through," the fund manager said.

The primary market Thursday saw issuances worth over INR 240 billion with state-backed entities and private companies tapping the market to raise funds. Big-ticket issuer NABARD raised INR 40.60 billion through infrastructure bonds maturing on May 28, 2035 at a coupon of 7.37%.

Power Finance Corp., another marquee issuer, raised INR 64.15 billion through two bonds of different maturities. The company raised INR 33.40 billion through bonds maturing on Jan. 15, 2030 at a coupon of 7.44%. The power sector financier raised another INR 30.75 billion through bonds maturing on Jan. 15, 2035 at a coupon of 7.40.

SIDBI raised INR 45.93 billion through bonds maturing on Jun. 11, 2029 at a coupon of 7.49%. Bajaj Finance raised INR 7.81 billion through reissuance of bonds maturing on Feb. 11, 2030 at a yield of 7.77%.

On Friday, TVS Credit Services plans to raise up to INR 10 billion through bonds maturing in three years. Godrej Housing Finance has also invited bids Friday to raise up to INR 5 billion through bonds maturing on Mar. 4, 2030.

The secondary market of corporate bonds was quiet as market participants were focused on the flurry of primary issuances. Deals aggregating to INR 115.08 billion were recorded on the National Stock Exchange and BSE combined, compared with INR 119.76 billion Tuesday. Only a few banks were active on the buying and selling sides, while mutual funds, insurance companies, and pension funds remained largely on sidelines.

Papers issued by REC, HDFC Bank, Indian Railway Finance Corp., Mancherial Repallewada Road, LIC Housing Finance, L&T Metro Rail (Hyderabad), Power Finance Corp., Piramal Enterprises, Sammaan Capital, Telangana State Industrial Infrastructure Corp., NABARD, Piramal Capital and Housing Finance, and SIDBI were traded the most on exchanges.

The secondary market was lacklustre also because market participants are waiting for India's GDP data for Oct-Dec, due on Friday. However, they do not expect the data to have major impact on yields. According to an Informist poll, Oct-Dec GDP growth is likely to have risen to 6.3% from a seven-quarter low of 5.4% in Jul-Sept. "Anything lower than 6%...you might see a reaction or a bit of movement in the market, otherwise the GDP data might not make a major impact," a dealer at a mid-sized private sector bank said.

UDAY BONDS

None of the Ujjwal DISCOM Assurance Yojana bonds were traded in the secondary market Thursday, according to the Reserve Bank of India's Negotiated Dealing System–Order Matching System.

BENCHMARK LEVELS FOR CORPORATE BONDS:

End

Edited by Ashish Shirke

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