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Informist, Wednesday, Apr. 9, 2025

By Vaishali Tyagi

MUMBAI – Yields on corporate bonds maturing in three years and five years fell by around 5-6 basis points, while yields on 10-year paper fell 1-2 bps Wednesday, driven by investors' rush to buy high-yielding corporate bond papers, dealers said. Demand from investors came after the Reserve Bank of India Governor Sanjay Malhotra's comments indicated easier monetary policy conditions in the coming months. Traders now anticipate another 50 basis points of rate cuts in 2025, with 25 bps expected in June and another cut in August or later.

"There was not a significant surge in demand but investors like pension funds and insurance companies were eager to buy and add high-yielding bonds to their portfolios," a dealer at a mid-sized brokerage firm said. "This move wasn't triggered by the current rate cut, but rather by expectations of future rate decisions. The MPC's consideration of further rate cuts has led to increased demand for corporate bonds, particularly among investors."

The RBI's Monetary Policy Committee Wednesday lowered the policy repo rate by 25 basis points to 6.00% in a unanimous decision. The committee also unanimously voted to change the policy stance to 'accommodative' from 'neutral', which was adopted in October.

The rate-setting panel's decision to lower the repo rate was in line with expectations. In an Informist poll, all 15 economists had expected the MPC to lower the repo rate by 25 bps from 6.25%. Some economists had also said the MPC could change the stance to 'accommodative' in this meeting. 

Corporate bond yields in the secondary market also tracked government bond yields which fell after the RBI official's comments on maintaining a comfortable surplus in banking system liquidity and a stable macroeconomic outlook that eased traders' concerns amid global uncertainties.

"The RBI's proactive approach to liquidity measures and the accommodative policy stance have boosted market sentiment, which increased demands for bonds and led to fall in corporate bond yields," the dealer quoted aboove said.

On Wednesday, trade volume picked up in the secondary market with deals aggregating INR 184.17 billion being recorded on the National Stock Exchange and the BSE combined, against INR 129.73 billion at the same time on Tuesday. Mostly insurance companies and pension funds were buying papers in three-to-five year tenures, while most banks remained on sidelines. A handful of mutual funds sold papers across tenures.

Bonds issued by National Bank For Agriculture And Rural Development, Power Finance Corp., LIC Housing Finance, Bajaj Finance, Bajaj Housing Finance, Suryapet Khammam Road, Apex Homes, HDB Financial Services, and Nalanda Shelter were traded the most on the exchanges. 

Activity in the primary market of corporate bonds was moderate with only one major issue being recorded. Axis Finance Wednesday raised INR 6.66 billion through two bonds of different maturities. On Friday, L&T Finance will tap the market to raise up to INR 10.00 billion through two bonds of different maturities. Shah Business Ventures and Agra Nagar Nigam has also invited bids on Friday to raise funds through their bond offerings.

Traders expect activity to pick up in the near term, with state-owned entities likely to tap the market to raise funds. The clarity on rate cuts and comments from central bank officials on liquidity have boosted investor confidence, creating opportunities for borrowers to tap into strong demand.

"We see a rise in activity in the near term, driven by state-owned entities looking to raise funds as investors eager to deploy cash, borrowers are likely see favorable conditions to raise funds in the coming weeks, given the clarity on rate cuts at least for now," a fixed income fund manager at a mid-sized mutual fund house said. 

UDAY BONDS

In the secondary market, Ujwal DISCOM Assurance Yojana bonds aggregating INR 30.10 million were traded at a weighted average yield of 6.5834-6.8433%, data from the Reserve Bank of India's Negotiated Dealing System–Order Matching System showed Wednesday.

* INR 6.50 million of Rajasthan's Mar. 15, 2026; and Jun. 23, 2026 bonds were dealt at a weighted average yield of 6.7419%-6.8433%

* INR 11.60 million of Haryana's Mar. 31, 2026 bonds were dealt at a weighted average yield of 6.5834%

* INR 7.00 million of Telangana's Mar. 7, 2032 bonds were dealt at a weighted average yield of 6.8175%

* INR 5.00 million of Uttar Pradesh's Jun. 2, 2027 bonds were dealt at a weighted average yield of 6.6933%

BENCHMARK LEVELS FOR CORPORATE BONDS:

End

Edited by Deepshikha Bhardwaj

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