India Corporate Bonds
Yields flat as mkt in wait-and-watch mode ahead of CPI
This story was originally published at 20:14 IST on 12 March 2025
Register to read our real-time news.Informist, Wednesday, Mar. 12, 2025
By Sachi Pandey
MUMBAI – Yields on corporate bonds in the secondary market ended flat on Wednesday as investors refrained from placing large bets ahead of India's CPI inflation for February, dealers said. "The market was overall sidewise (ahead of the release of CPI data), and the number has come below market expectation," a fixed income trader at a mid-sized insurance company said.
"Even tomorrow (Thursday), I doubt if the market will react. Corporate bonds typically take a couple of days to react to any data point, and with tax outflows expected, the market has been largely inactive, everyone is in wait and watch mode. So levels are expected to remain range-bound this month (March)."
India's headline CPI inflation fell below the Reserve Bank of India's medium-term target of 4% for the first time in six months as vegetable prices continued to decline. According to data released by the statistics ministry on Wednesday, CPI inflation moderated to a seven-month low of 3.61% in February from a revised 4.26% in January. According to an Informist poll, the headline inflation was seen at 3.9% in February. However, core CPI inflation rose to 4.0% in February, the most in 15 months, from 3.7% in January.
"Tight liquidity is keeping market levels in check. While there are inflows, outflow amounts are matching them, making liquidity conditions challenging in corporate bonds," the trader said. According to data from the Reserve Bank of India, the net liquidity injected by the central bank--a proxy for systemic liquidity conditions--reduced to INR 1.05 trillion on Tuesday from INR 1.45 trillion on Monday.
In the secondary market, deals aggregating INR 174.19 billion were recorded Wednesday on the National Stock Exchange and BSE combined, compared to INR 138.36 billion on Tuesday. The most actively traded bonds included those issued by Larsen and Toubro, REC, Tata Capital Housing Finance, HDFC Bank, State Bank of India, Power Finance Corp., Sammaan Capital, Telangana State Industrial Infrastructure Corp., National Bank For Agriculture And Rural Development, Bajaj Finance, Tata Capital Financial Services, Small Industries Development Bank of India, GMR Airports Infrastructure, Aditya Birla Finance.
In the primary market of corporate bonds, India Infradebt raised INR 3.01 billion by reissuing bonds maturing on Dec. 6, 2034, at a yield of 7.94%. The company had originally planned to raise INR 4.00 billion. L&T Finance also raised INR 1.60 billion by reissuing Jan. 4, 2027, bonds at a yield of 7.83%. All the investors in the bond were non-qualified buyers. Kosamattam Finance and Indel Money also raised INR 1.00 billion each through bonds.
On Thursday, non-banking financial companies and public sector entities are lined up to raise up to INR 89.75 billion. Frequent issuer Power Finance Corp plans to raise up to INR 40 billion through bonds maturing on Apr. 15, 2026. The company also plans to raise up to INR 40 billion through bonds maturing on Jul. 15, 2028. Market participants expect the coupon on the bonds to range between 7.57-7.65%. The bonds are expected to attract interest from mutual funds.
HDFC ERGO General Insurance Co. also plans to tap the bond market and raise funds worth INR 3.25 billion via unsecured subordinated bonds maturing in 10 years. Arka Fincap has sought bids for bonds maturing in 10 years to raise INR 2.50 billion. Standard Chartered Capital plans to raise INR 2 billion through bonds maturing on May 18, 2026, while Nuvama Wealth Finance plans to raise INR 1 billion by reissuing bonds maturing on Apr. 16, 2027.
Next week, the market is expected to see an uptick in issuances, with major issuers like Canara Bank, NTPC, and REC lined up to raise funds. "This week has been quieter due to the festive mood as many participants are on leave, but primary market drill will pick up again next week," said a dealer at a mid-sized brokerage.
UDAY BONDS
In the secondary market, Ujwal DISCOM Assurance Yojana bonds aggregating INR 4.50 million were traded at a weighted average yield of 7.0810-7.2803%, data from the Reserve Bank of India's Negotiated Dealing System–Order Matching System showed Wednesday.
* INR 2.00 million of Telangana's Oct. 18, 2029 bonds were traded at 7.2803%
* INR 1.50 million of Himachal Pradesh's Feb. 28, 2027 bonds were traded at 7.0966%
* INR 1.00 million of Andhra Pradesh's Oct. 18, 2029 bonds were traded at 7.0810%
BENCHMARK LEVELS FOR CORPORATE BONDS:
Tenure | Wednesday | Tuesday |
Three-year | 7.54-7.57% | 7.54-7.57% |
Five-year | 7.47-7.50% | 7.47-7.50% |
10-year | 7.36-7.38% | 7.36-7.38% |
End
Edited by Saji George Titus
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