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Informist, Thursday, Mar. 6, 2025

By Sachi Pandey

MUMBAI – Corporate bond yields fell marginally across tenures Thursday following the Reserve Bank of India's announcement of additional measures to ease the liquidity deficit in the banking system on Wednesday, dealers said.

"Ofcourse the sentiment in the market is positive post surprising amount of OMO (open marker operation auctions) announced by the RBI and the lever were better (lower). But they (levels) are not going to go down from here, we expect the levels to stay within a narrow range as the financial year-end approaches and everyone will likely hold on to their positions and focus on closing their books," a dealer at a large sized brokerage firm said.   

After market hours on Wednesday, the RBI said it would buy gilts worth INR 1.00 trillion through open market auctions in March. In addition, it would conduct another dollar/rupee buy/sell swap auction of $10 billion for a tenure of 36 months on Mar. 24. 

Given the tight liquidity conditions with outflows for tax deducted at source, excise duty, advance tax and goods and services tax payments lined up this month, dealers had expected the RBI to take these steps. However, market participants believe that while the new measures will help offset outflows, they are unlikely to bring a significant improvement to liquidity. This view kept traders from buying bonds aggressively, which confined prices to a narrow band, they added.

As per the latest data from the RBI, the net liquidity injected by the RBI rose to INR 544.77 billion on Wednesday primarily due to payment for Tuesday's state governments' bond auction of INR 505.00 billion.

In the secondary market on Thursday, deals aggregating to INR 139.81 billion were recorded on the National Stock Exchange and BSE combined, against INR 103.90 billion on Wednesday. The activity was mostly concentrated in the shorter maturity segment with mutual funds selling bonds, while some banks were seen buying, dealers said.

"This (OMO auction) is positive news for the market, but the direct impact will be more noticeable on short-term bonds, particularly those with maturities in the 2-5 year range. Today's (Thursday) activity was primarily in these (shorter) segments," said a dealer at a major private sector bank.

Among the most traded bonds were those issued by companies like REC, HDFC Bank, Indian Railway Finance Corp., State Bank of India, Hyderabad Jabilli Properties, Power Finance Corp., Sammaan Capital, Telangana State Industrial Infrastructure Corp., National Bank For Agriculture And Rural Development, Bajaj Finance, IIFL Samasta Finance, Small Industries Development Bank of India,  Kerala Infrastructure Investment Fund Board, Mahindra & Mahindra Financial Services, and Export Import Bank of India. 

In the primary market of corporate bonds, Tata Capital raised INR 4.00 billion through reissuance of bonds maturing on Jan. 22, 2027 at an yield of 7.84%. Aditya Birla Finance also tapped the bond market and raised INR 3.40 billion at a pre fixed coupon of 7.9413%. 

IIFL Finance raised INR 1.35 billion thorugh bonds maturing in two years at a coupon of 9.90%, while Indel Money raised INR 500 million through bonds maring on Oct. 7, 2026 at 11.00% coupon. 

On Friday, frequent issuer, National Bank for Agriculture and Rural Development has invited bids to raise up to INR 70 billion through the reissuance of bonds maturing on Apr. 29, 2030. Market participants expect the yield on this reissuance to be between 7.50% and 7.55%. Earlier in February, the company raised INR 45.00 billion through bonds maturing on Mar. 24, 2028, at a yield of 7.51%.

Edel Finance Company Ltd., a wholly owned subsidiary of Edelweiss Financial Services Ltd., has also invited bids to raise INR 5 billion through bonds maturing on Mar. 10, 2028. Muthoot Housing Finance Co and Navi Finserv are also planning to raise funds through their respective bond offerings on Friday. 

UDAY BONDS

In the secondary market, Ujwal DISCOM Assurance Yojana bonds aggregating INR 59.40 million were traded at a weighted average yield of 7.1436-7.1543%, data from the RBI's Negotiated Dealing System–Order Matching System showed Wednesday.

* INR 50.00 million of Telangana's Mar. 7, 2030 bonds were traded at 7.1543%

* INR 9.40 million of Chhattisgarh's Mar. 28, 2029 bonds were traded at 7.1436%

BENCHMARK LEVELS FOR CORPORATE BONDS:

End

Edited by Deepshikha Bhardwaj

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