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Informist, Thursday, Apr. 17, 2025

By Ashna Mariam George 

MUMBAI – Yields of three-year corporate bonds in the secondary market fell for the second consecutive day Thursday, as banks and mutual funds aggressively bought papers on expectations of further rate cuts by the Reserve Bank of India's Monetary Policy Committee during the calendar year, dealers said. Yields on three-year bonds fell by 3 basis points, while yields on five-year and 10-year papers were largely unchanged due to lower demand, they said. 

"Everyone has cash right now, and people are more hopeful for the rate cut to happen further," a dealer at a mid-sized brokerage firm said. "But there are concerns regarding tariffs (by the US) still pending, as it is paused only till July." The market expects a 50 bps rate cut in the calender year, after the monetary policy committee reduced the repo rate by 25 bps to 6.00% and changed its stance to 'accommodative' from 'neutral' on Apr. 9, market participants said.

"Broadly, the market is expecting a 50 basis points cuts... 25 bps each in the two subsequent policies. In the coming three-to-six months, market is expecting the terminal (repo) rate somewhere around 5.5%, and growth is expected to be resilient," a fixed income fund manager at a mid-sized mutual fund house said.

While banks and mutual funds bought papers, few mutual funds and insurance companies were on the selling side, dealers said. However, trade volume fell in the secondary market as several market participants were absent ahead of a long weekend, they added. "Many money market participants were on leave as there is a long weekend holiday and the FIMMDA (Fixed Income Money Market and Derivatives Association of India) event," a dealer at another mid-sized brokerage firm said. The FIMMDA's annual conference is being held in Bali Thursday through Sunday. Additionally, money markets are shut Friday on account of Good Friday and corporate bonds are not traded Saturday. 

Lack of participation led to a decline in trade volume with deals aggregating INR 134.51 billion recorded on the National Stock Exchange and BSE combined, down sharply from INR 176.50 billion reported Wednesday.

Papers issued by LIC Housing Finance, the Telangana State Industrial Infrastructure Corp., the National Bank For Agriculture And Rural Development, the Small Industries Development Bank of India, Power Grid Corp. of India, and Axis Finance were the most traded on the exchanges. 

Primary market issuance was moderate Thursday with only one notable issue offered. Non-banking financier Poonawalla Fincorp raised INR 11.60 billion through two-year bonds at a coupon of 7.65%, and INR 3.65 billion through three-year bonds at 7.70%. The Housing and Urban Development Corp. has invited bids Monday to raise INR 25 billion through bonds maturing in seven years. Market participants estimate the issue will sell at a coupon of 6.90-6.95%.

UDAY BONDS

None of the Ujjwal DISCOM Assurance Yojana bonds were traded in the secondary market Thursday, according to the Reserve Bank of India's Negotiated Dealing System–Order Matching System.

BENCHMARK LEVELS FOR CORPORATE BONDS:

End

Edited by Deepshikha Bhardwaj

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