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Informist, Friday, Mar. 7, 2025

By Sachi Pandey

MUMBAI – Yields on corporate bonds remained in a thin band in the secondary market on Friday due to a lack of firm domestic and global cues, dealers said. "After the OMO (open market operations) auction the sentiment has turned to positive, but the investors are still holding on to their positions. There is not much buying or selling activity due to the year-end," said a dealer at a mid-sized brokerage firm.

Only a handful of mutual funds were selling bonds, while banks were buying on Friday, dealers said. Deals aggregating to INR 170.33 billion were recorded on the National Stock Exchange and BSE combined, against INR 139.81 billion on Thursday.

Papers issued by Tata Capital, Mahindra Rural Housing Finance, National Highways Authority of India, Axis Finance, Aditya Birla Finance, HDB Financial Services, Kerala Infrastructure Investment Fund Board, Small Industries Development Bank of India, Tata Capital Financial Services, Bajaj Finance, National Bank for Agriculture and Rural Development, Telangana State Industrial Infrastructure Corp., Sammaan Capital, Power Finance Corp., Mancherial Repallewada Road, Indian Railway Finance Corp., HDFC Bank and REC were traded on the bourses.

On Wednesday, the Reserve bank of India announced plans to buy gilts worth INR 1.00 trillion through open market auctions in March. It would also conduct another dollar/rupee buy/sell swap auction of $10 billion for a tenure of 36 months on Mar. 24. 

However market participants expects the spreads between corporate bond and government securities to remain widened. An assistant vice-president at a mid-sized private sector bank explained, "There might be a shallow move till April, but the spreads won't be affected much." The source added that tight liquidity conditions had been a concern for market. "There was already tight liquidity and then several PSUs entered the market. Which resulted in a continuous supply of primary offerings with insufficient liquidity, driving investors to demand a premium. If PSU issuances continue, this trend could continue, as liquidity isn't as comfortable as it should be given the level of supply. So rates are likely to remain steady until at least April."

The spreads between 10-year benchamrk government bonds and 10-year corporate bonds is currently at 50-55 basis point. 

According to the latest data from the Reserve Bank of India, the net liquidity injected by the central bank--a proxy for systemic liquidity conditions--was at INR 569.09 billion Thursday, against INR 544.77 billion Wednesday. Dealers expect liquidity conditions to deteriorate slightly in the coming week owing to the tax outflows which are expected to drain around INR 500 billion from the banking system. 

Next week, several public sector entities, including Housing and Urban Development Corp. and Power Finance Corp., are lined up to raise funds through the primary market of corporate debt market, while companies like Indian Renewable Energy Development are preparing to announce bidding details for their bond offerings soon.

In the primary market, the benchmark paper for corporate bonds, NABARD, reissued its paper on Friday. The non-banking financier raised INR 70.00 billion through the reissuance of bonds maturing on Apr. 29, 2030, at a yield of 7.50%. The bond, which met market expectations, was fully subscribed. According to the bid book accessed by Informist, the company received 167 bids for the issuance aggregating to INR 115.85 billion in the yield range of 7.3992-7.6000%.

Edel Finance Co also tapped the bond market to raise funds worth INR 5.00 billion through bonds maturing in three years at a coupon of 10.35%. Navi Finserv and Muthoot Housing Finance Co. also raised funds through their bond offerings.

On Monday, Housing and Urban Development Corp. has invited bids to raise up to INR 40.00 billion through bonds maturing in 10 years. Market participant expect the coupon for this issue to range between 7.34-7.38%. "They are not very frequent issuers in the market, so if this is their final issuance for the financial year (2024-25), they might receive bids at these levels," the assistant vice-president quoted above said.  

Aditya Birla Housing Finance also seeks bids for Aug. 11, 2028 bond issuance to raise up to INR 15.00 billion. Aptus Value Housing Finance India plans to raise INR 2.00 billion through bonds maturing in five years at a fixed coupon of 8.75%.

UDAY BONDS

In the secondary market, Ujwal DISCOM Assurance Yojana bonds aggregating INR 304.50 million were traded at a weighted average yield of 6.5395-7.2595%, data from the RBI's Negotiated Dealing System–Order Matching System showed Wednesday.

* INR 300.00 million of Punjab's Mar. 30, 2025 bonds were traded at 6.5395%

* INR 3.50 million of Himachal Pradesh's Feb. 28, 2027 bonds were traded at 7.2595%

* INR 1.00 million of Andhra Pradesh's Oct. 18, 2029 bonds were traded at 7.0889%

BENCHMARK LEVELS FOR CORPORATE BONDS:

End

Edited by Deepshikha Bhardwaj

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