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Informist, Monday, Apr. 21, 2025

By Vaishali Tyagi

MUMBAI – Corporate bond yields in the secondary market fell sharply across tenures Monday, driven by strong expectations of rate cuts by the Reserve Bank of India's Monetary Policy Committee in the upcoming June policy, dealers said. Traders actively bought papers betting on at least a 25-basis-point rate cut in June, they added. Yields in the corporate bonds fell by 6-7 basis points across tenures.

"Corporate bond yields moved sharply lower, following growing hopes of rate cuts and a fall in government bond yields," a dealer at a mid-sized brokerage firm said. "Every passing day, there is a strong view about a rate cut in the upcoming RBI policy of at least 25 basis points, and every investor is putting their efforts to capitalise on it."

A fall in the yields on government securities also led to a fall in the yields on corporate bonds, dealers said. Yields on government securities fell as traders also continued to buy gilts on hopes the RBI would cut its key repo rate by another 50 bps by the end of 2025, dealers said. Monday, the yield on the 10-year benchmark government security fell 5 bps to 6.32%, the lowest level since Nov. 9, 2021.

Banks and mutual funds aggressively bought papers on expectations of further rate cuts. In contrast, a handful of insurance companies and pension funds sold papers across tenures. "We are seeing a significant increase in buying activity, particularly from banks and mutual funds, as they are positioning themselves for potential rate cuts," the dealer quoted above said.

The secondary market for corporate bonds saw increased participation, driven by limited primary market issuances, dealers said. "Investors are not seeing too many big bond issuances in the primary market, so participants flocked to the secondary market to fulfil their requirements," a fund manager at a mid-sized mutual fund house said. "I think issuers might take some time to decide whether they want to come before or post-RBI policy outcome, which reflects the cautious stance of issuers."

On Monday, deals aggregating INR 128.63 billion were recorded on the National Stock Exchange and BSE combined, up from INR 134.51 billion reported Thursday. Indian financial markets were closed on Friday for Good Friday.

Papers issued by REC, Power Finance Corp., National Bank for Agriculture and Rural Development, Bajaj Finance, Tata Capital Financial Services, Bajaj Housing Finance, and Small Industries Development Bank of India were traded the most on exchanges. 

Stable global conditions also contributed to the market's focus on domestic cues, with investors closely watching the upcoming RBI monetary policy for potential rate cuts. "There is no major global market trigger to focus on. Whatever fluctuation is happening in yields is due solely based on domestic factors, and the rate cut expectation from the RBI has taken centre stage."

Issuance in the primary market was moderate Monday, with only one major issue during the day. State-owned Housing and Urban Development Corp. raised INR 24.30 billion through seven-year bonds at a coupon of 6.90%. 

ICICI Home Finance Co. has invited bids Tuesday to raise up to INR 7 billion through two-year bonds maturing on Jun. 28, 2027 and near-three-year bonds maturing on Jul. 24, 2028. Sundaram Finance is also in line to tap the market Tuesday to raise INR 7.50 billion through two-year bonds.

UDAY BONDS

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

BENCHMARK LEVELS FOR CORPORATE BONDS:

End

Edited by Saji George Titus

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