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Informist, Tuesday, Mar. 25, 2025

By Ashna Mariam George

MUMBAI – Lower-than-expected cut-off on bonds issued in the primary market pushed down yields in the secondary market of corporate bonds by 2-3 basis points, dealers said. The cut-offs for primary issuances were 5-6 bps lower than market expectations, dealers said.

"There was a huge demand from EPFO (Employees' Provident Fund Organisation) and LIC (Life Insurance Corp. of India) which bid at lower levels, pushing down the cut-off," a dealer at a mid-sized brokerage firm said. "The levels in the secondary market were better (down) just after the EXIM (Export-Import Bank bond) cut-off."

The cut-offs for bonds issued by the Export-Import Bank of India and Housing and Urban Development Corp. on Tuesday were lower than market expectations. Export-Import Bank of India raised INR 23.50 billion through bonds maturing on Jun. 30, 2030, at a coupon of 7.12%, sharply lower than the expectations of 7.15%-7.18%. According to the bid book accessed by Informist, the issue garnered bids for coupons as low as 7.05%.

HUDCO raised INR 20.00 billion through 10-year bonds at a coupon of 7.19%. The market had expected the cut-off for the issue in the range of 7.20%-7.25%. Indian Renewable Energy Development Agency also tapped the market Tuesday and raised INR 9.10 billion through 10-year tier-II bonds at a coupon of 7.74%. 

Wednesday is also packed with issuances from several public sector entities and non-banking financial companies. Indian Railway Finance Corp. has invited bids to raise up to INR 30.00 billion through bonds maturing on Apr. 27, 2035, while India Infrastructure Finance Co. has sought bids to raise up to INR 10.00 billion through bonds maturing in seven years. According to dealers, the coupon on the IRFC issue is seen at 7.18%-7.20%. 

Axis Finance, Godrej Finance, Tata Motors, Tata Capital and Toyota Financial Services are also in line to raise funds on Wednesday. According to market participants, all these issuers are likely to see favourable demand from investors, who are aggressively positioning in anticipation of rate cuts in April to make mark-to-market gains in the next financial year.

Market experts believe the increased confidence about a 25-bps repo rate cut in April by the Reserve Bank of India's Monetary Policy Committee has boosted the demand for bonds.

In its April policy meeting, the central bank is also expected to announce measures to infuse liquidity in the banking system. "RBI has been steadfast that they want to keep the liquidity comfortable in the system because any kind of a rate cut will be incomplete if there is no transmission, and that transmission is through liquidity... if the RBI cuts rates and there is no liquidity, borrowing costs will remain higher," a dealer at a mid-sized private sector bank said. 

As part of its efforts to infuse liquidity in the banking system, the central bank on Tuesday bought INR 445.41 billion worth of gilts through an open market operation auction. On Monday, the RBI conducted a $10 billion dollar/rupee buy/sell swap auction. "The OMOs and the buy/sell swaps done by the RBI... is to bolster liquidity and confidence in liquidity," the dealer quoted above said. 

As per RBI data, the net liquidity injected by the central bank, a proxy for liquidity deficit, was INR 1.93 trillion on Monday.

Trading activity in the secondary market of corporate bonds was muted as market participants were focused on the supply in the primary market. Deals aggregating INR 195.88 billion were recorded on the National Stock Exchange and the BSE combined, against INR 165.63 billion Monday. Mutual funds, banks, and insurance companies were active on both the buying and selling sides, dealers said. 

Papers issued by REC, HDFC Bank, Cholamandalam Investment And Finance Co., Power Finance Corp., Hinduja Leyland Finance, Sammaan Capital, Telangana State Industrial Infrastructure Corp., Indian Renewable Energy Development Agency, National Bank For Agriculture And Rural Development, India Infradebt, Small Industries Development Bank of India, and Shriram Finance were traded the most on the bourses.  

UDAY BONDS

In the secondary market, Ujwal DISCOM Assurance Yojana bonds aggregating INR 261.60 million were traded at a weighted average yield of 6.8030-7.2186%, data from the Reserve Bank of India's Negotiated Dealing System–Order Matching System showed Tuesday.

* INR 211.60 million of Uttar Pradesh's Mar. 29, 2025, Jun. 2, 2028, and Jun. 2, 2030 were traded at 6.8030-7.2186%

* INR 50.00 million of Haryana's Mar. 31, 2025 bonds were traded at 7.1048%

BENCHMARK LEVELS FOR CORPORATE BONDS:

End

Edited by Saji George Titus

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