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Informist, Wednesday, Apr. 2, 2025

By Ashna Mariam George 

MUMBAI – Yields on corporate bonds nosedived across tenures on Wednesday following the Reserve Bank of India's announcement of open market operations on Tuesday, dealers said. Yields on bonds maturing in three years plummeted by more than 15 basis points, while yields on papers maturing in five years and 10 years slipped by 10-13 bps, they said.

Late on Tuesday, the RBI announced four tranches of OMO purchases in April, each for a notified quantum of INR 200 billion. This follows a shift in the proxy for systemic liquidity conditions, which moved into surplus after being in deficit since mid-December. The net liquidity absorbed by the central bank - a proxy for the systemic liquidity surplus - was at INR 1.42 trillion on Tuesday, RBI data showed. 

"RBI surprised Tuesday late evening with an OMO, and that shows its intent to maintain a liquidity surplus," a fixed income fund manager at a mid-sized mutual fund house said. "Easing liquidity conditions are a precursor to rate cut...because you need the system liquidity to be ample for effective transmission of rates."

The OMO announcement boosted confidence of a 25-bps rate cut at the RBI's Monetary Policy Committee meeting on Apr. 7-9, dealers said. Market participants now expect a stance change at the policy meeting, along with the repo rate being lowered to 6.00%.  

Dealers said the secondary market was very active on Wednesday, as investors rushed to lock in yields before the rate cut. "It was a happening day today (Wednesday) and buyers were going haywire for assets," a dealer at a mid-sized brokerage firm said. Market participants also took note of a correction in the yield curve, which was inverted earlier. "With the sharp fall in yields, the yield curve is flattening," said the dealer.

Trade volume picked up in the secondary market with deals aggregating INR 176.16 billion being recorded on the National Stock Exchange and the BSE combined, against INR 117.06 billion on Friday.

Bonds issued by Reliance Capital, REC, Housing And Urban Development Corp., HDFC Bank, Indian Railways Finance Corp., Apex Homes, LIC Housing Finance, JSW Energy, Power Finance Corp., Sammaan Capital, Telangana State Industrial Infrastructure Corp., National Bank For Agriculture And Rural Development, Bajaj Finance, Tata Capital Financial Services, Export Import Bank of India, and Small Industries Development Bank of India were traded the most on the bourses. 

On the other hand, activity in the primary market of corporate bonds remained moderate on Wednesday, with only one major issue being recorded. Bajaj Finance tapped the market to raise INR 59.90 billion through two bonds of different maturities. 

After a supply-heavy March, market participants anticipate a slowdown in bond supply with the onset of the new financial year, as companies and financial institutions will tap the market only after they charter out their fundraising plans for 2025-26.

UDAY BONDS

In the secondary market, Ujwal DISCOM Assurance Yojana bonds aggregating INR 2.00 million were traded at a weighted average yield of 8.2186%, data from the Reserve Bank of India's Negotiated Dealing System–Order Matching System showed Wednesday.

* INR 2.00 million of Punjab's Mar. 30, 2026 bonds were traded at 8.2186%

BENCHMARK LEVELS FOR CORPORATE BONDS:

End

Edited by Avishek Dutta

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