India Corporate Bonds
Ylds continue to fall as mkt sentiment stays positive
This story was originally published at 19:52 IST on 3 April 2025
Register to read our real-time news.Informist, Thursday, Apr. 3, 2025
By Sachi Pandey
MUMBAI – Yields on corporate bonds continued to fall Thursday, extending a 10-15 basis-point drop across tenures earlier this week, as market sentiment remained upbeat, dealers said. "The fall in yields was much better in the morning, but some selling pressure later narrowed the fall to 3-4 basis points," a dealer at a mid-sized brokerage firm said. "Still, the overall sentiment remains positive."
A combination of factors, including the Reserve Bank of India's open market operations, growing bets on a rate cut in April, and a decline in US Treasury yields, kept the bond market buoyant.
Government bond yields also fell tracking an overnight decline in US Treasury yields. The yield on the 10-year US Treasury note dropped to 4.06% at 0915 IST from 4.14% at 1700 IST on Wednesday, briefly touching 4.05%--its lowest level since mid-October.
The RBI Thursday bought the entire notified amount of INR 200 billion through open market purchase of gilts through an auction. Traders are now waiting for the outcome of the Monetary Policy Committee's meeting. According to 15 economists polled by Informist, the central bank is widely expected to cut interest rates again. The Monetary Policy Committee will begin its three-day meeting on Monday, and Governor Sanjay Malhotra will announce the decision at 1000 IST on Wednesday.
Rate cut expectations have been further fueled by concerns over the impact of US tariffs on India, dealers said. Dealers noted that if the 26% import duty on Indian goods, announced by US President Donald Trump, leads to a slowdown in exports, the RBI's Monetary Policy Committee may opt for deeper or faster rate cuts to counter the potential hit to economic growth.
Another factor supporting the fall in corporate bond yields is less number of trading days this week, which led to a buildup of positions, market participants said. "This week is short, and trading activity lower, so everyone is participating. Also, with the quarter ending and a new financial year beginning, investors are repositioning their portfolios," the dealer added. Money markets were also closed on Tuesday for closing of accounts of banks.
With market sentiment staying strong, trading activity surged in the secondary market. Bond deals worth INR 243.091 billion were recorded on the National Stock Exchange and the BSE combined, up from INR 176.159 billion on Wednesday. Mutual funds and foreign banks were reportedly active buyers, while public sector banks and merchant bankers sold bonds.
Bonds issued by Reliance Capital, REC, HDFC Bank, Indian Railways Finance Corp., LIC Housing Finance, Power Finance Corp., and National Bank for Agriculture and Rural Development were among the most traded.
The primary market remained subdued, with no major issuances on Thursday. "The primary market is likely to stay quiet for now, as investors and issuers assess market conditions," a dealer at a private sector bank said. "With the new financial year just beginning and the MPC meeting ahead, issuers are waiting for more clarity before making their moves."
On Friday, Muthoot Finance has invited bids to raise up to INR 30.00 billion through two bond offerings. Aditya Birla Housing Finance is also looking to raise up to INR 10.00 billion through bonds maturing in September 2028.
UDAY BONDS
In the secondary market, Rajasthan's Jun. 23, 2025 Ujwal DISCOM Assurance Yojana bonds aggregating INR 1.50 million were traded at a weighted average yield of 6.7923%, data from the RBI's Negotiated Dealing System–Order Matching System showed on Thursday.
BENCHMARK LEVELS FOR CORPORATE BONDS:
Tenure | THURSDAY | WEDNESDAY |
Three-year | 7.07-7.10% | 7.09-7.11% |
Five-year | 7.04-7.06% | 7.06-7.08% |
10-year | 6.98-7.02% | 7.03-7.06% |
End
With inputs from Ashna Mariam George
Edited by Ashish Shirke
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