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Informist, Wednesday, Mar. 19, 2025

By Ashna Mariam George 

MUMBAI – Yields on corporate bonds maturing in three years and five years fell 4-5 basis points Wednesday after the Reserve Bank of India announced an open market operation to buy gilts, dealers said. The yield on 10-year paper fell only 1-2 bps as it was not actively traded in the secondary market, they said. 

The RBI late Tuesday announced it will conduct an OMO auction on Mar. 25 to buy gilts worth INR 500 billion. The central bank has already bought gilts aggregating to INR 1.00 trillion in March through two OMO auctions.

"Now the market is waiting to take cues from the OMO result, and after yesterday's (Tuesday) OMO, liquidity seems to have improved " a dealer at a mid-sized brokerage firm said. The net liquidity injected by the RBI

was slightly lower on Tuesday at INR 2.26 trillion, against INR 2.43 trillion on Monday.

The secondary market saw improved activity with banks and mutual funds buying and selling papers across tenures, dealers said. Pension funds were also actively trading longer-tenure papers, they said. Trade volume rose in the secondary market with deals aggregating to INR 202.93 billion being recorded on the National Stock Exchange and BSE combined, against INR 117.62 billion on Tuesday.

Bonds issued by REC, Indian Railway Finance Corp., State Bank of India, Cholamandalam Investment And Finance Co., Power Finance Corp., Sammaan Capital, Telangana State Industrial Infrastructure Corp., National Bank For Agriculture And Rural Development, Bajaj Finance, Export-Import Bank of India, Small Industries Development Bank of India, and Aptus Value Housing Finance India were traded the most on exchanges.

Market participants said the lower-than-expected cut-offs on bonds issued by National Bank for Agriculture and Rural Development and Small Industries Development Bank of India on Wednesday also pushed down yields in the secondary market. "The levels (in the primary market) are now pretty good and people are switching to corporate bonds because the spread (between government securities and corporate bonds) has increased... going forward when more liquidity comes in, the spreads, which have gone up, will come down. They are not sustainable, so there is a huge demand now," a fund manager at a mid-sized mutual fund house said. "A pretty aggressive SDL (state bond auction) auction yesterday (Tuesday) and today's (Wednesday) cut-offs in the primary (corporate bond primary market) shows that buyers who were sitting outside a few weeks back have now jumped into the bandwagon, especially with the rupee rallying in the last few days and good trade deficit numbers."

On Wednesday, the rupee ended at an over seven-week high against the dollar due to foreign fund inflows and as traders trimmed their long dollar positions, according to dealers. This is the sixth consecutive trading day the rupee has settled higher against the dollar.

The primary market on Wednesday saw a heavy supply of issuances worth over INR 150.00 billion. Big ticket issuer--NABARD-—raised INR 70.00 billion through bonds maturing on Sept. 24, 2028, at a coupon of 7.48%. Market participants were expecting a coupon in the range of 7.50-7.52%.

Small Industries Development Bank of India also tapped the market on Wednesday and raised INR 60.00 billion through bonds maturing in five years at a coupon of 7.39%. Dealers said they expected the issue to have a coupon higher than 7.40%.

Another marquee issuer, Indian Renewable Energy Development Agency raised INR 12.47 billion through perpetual bonds at a coupon of 8.40%. India Infradebt and IIFL Finance also raised funds on Wednesday. 

On Thursday, Century Joint Developments plans to raise INR 7.50 billion through bonds maturing on Nov. 25, 2028. SIS, MAS Financial Services, Hinduja Leyland Finance, and Muthootu Mini Financiers are also in line to tap the market on Thursday. 

UDAY BONDS

In the secondary market, Ujwal DISCOM Assurance Yojana bonds aggregating INR 136.43 million were traded at a weighted average yield of 7.1335-7.7205%, data from the Reserve Bank of India's Negotiated Dealing System–Order Matching System showed Wednesday.

* INR 42.63 million of Uttar Pradesh's Jun. 2, 2028, and Mar. 21, 2029 bonds were traded at 7.2241-7.2244%

* INR 34.60 million of Haryana's Mar. 31, 2025 and Mar. 31, 2026 bonds were traded at 7.2849-7.3882%

* INR 33.70 million of Rajasthan's Mar. 15, 2026 and Jun. 23, 2025 bonds were traded at 7.3869-7.7205%

* INR 20.00 million of Tamil Nadu's Feb. 22, 2030 and Feb. 22, 2027 bonds were traded at 7.2094-7.2793%

* INR 4.00 million of Telangana's Mar. 7, 2028 bonds were traded at 7.1592%

* INR 1.50 million of Himachal Pradesh's Feb. 28, 2027 bonds were traded at 7.1335%

BENCHMARK LEVELS FOR CORPORATE BONDS:

End

Edited by Saji George Titus

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