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Informist, Monday, Apr. 28, 2025

By Vaishali Tyagi

MUMBAI – Yields on corporate bonds remained broadly unchanged Monday, after a 4-6 basis point rise on Friday, as selling pressure slowed down slightly, dealers said. Traders were cautious and refrained from aggressive bets amid rising geopolitical tensions between India and Pakistan following the Pahalgam terror attack last week. Dealers said fears of an escalation in tensions between the two countries led to a rise in yields in the secondary market Friday, with selling pressure increasing across tenures.

"We expect yields to move steadily upward due to continued selling pressure, and some profit-booking is also happening, leading to a slight increase in yields," a dealer at a mid-sized brokerage firm said. 

Traders are likely to cut their positions in the secondary market and flock to the primary market, expecting more issuances and better buying opportunities this week. 

While state-owned banks were on the selling side, mutual funds and insurance companies were majorly on the buying side. Dealers said some pension funds also likely sold papers in the secondary market. Deals aggregating INR 138.38 billion were traded on the National Stock Exchange and the BSE combined, lower than INR 163.55 billion on Friday. Most traded bonds on Monday were those issued by the REC, IFCI, Housing and Urban Development Corp., HDFC Bank, ICICI Home Finance Co., and Highways Infrastructure Trust.

In the primary market, two major deals happened Monday. State-owned issuer REC raised INR 50 billion through two bonds of different maturities. The company issued INR 30 billion through bonds maturing on May 31, 2030, at a coupon rate of 6.87%, which was fully subscribed. According to the bid book accessed by Informist, the company got 96 bids totalling INR 70.33 billion with the coupon ranging from 6.72% to 7.00%.

The power project financer raised another INR 20 billion through papers maturing on May 31, 2035 at a coupon of 6.86%. For this issuance, the company received 74 bids aggregating to INR 62.60 billion in the coupon range of 6.82% to 7.07%, according to the bid book accessed by Informist.

Another state-owned company, Hindustan Petroleum Corp., tapped the market to raise INR 25 billion through bonds maturing in five years at a coupon of 6.73%. The issue was fully subscribed. According to the bid book accessed by Informist, the company received 87 bids aggregating INR 62.25 billion in the coupon range of 6.50-7.15%.

"Both (REC) bonds were issued at a very good coupon rate, surprisingly...almost 8-9 bps better than market expectations of 6.95-6.98%," a dealer at another mid-sized brokerage firm said. "See, this clearly indicates that investors have a good appetite to invest."

Monday's bond issuances by REC and HPCL have surprised the market with their coupon rates. According to dealers, the coupon rates received by both companies were significantly better than expected, beating market expectations. Given the secondary market yields for similar tenure papers were 8-10 bps higher, most market participants expected the coupon rates to be maximum 5-6 bps lower than that. 

After the Reserve Bank of India cut the policy repo rate this month by 25 bps to 6.00%, the borrowing cost for several top-rated state-owned entities have fallen below 7% on an annualised basis. A fall in benchmark government bond yields and injection of liquidity also contributed to low borrowing cost. Housing and Urban Development Corp., National Housing Bank, Indian Railway Finance Corp., Hindustan Petroleum Corp., and REC raised amount below 7.00% coupon. 

On Tuesday, a few non-banking financial companies are in line to borrow funds from the market. Muthoot Finance has invited bids to raise INR 10 billion through bonds maturing in five years. Nexus Select Trust will also tap the market to raise INR 5.50 billion through seven-year bonds maturing on Apr. 30, 2032. 

UDAY BONDS

In the secondary market, Ujwal DISCOM Assurance Yojana bonds aggregating INR 15.30 million were traded at a weighted average yield of 6.6617-7.1813%, data from the Reserve Bank of India's Negotiated Dealing System–Order Matching System showed Monday.

* INR 6.10 million of Haryana's Mar. 31, 2026 bonds were dealt at a weighted average yield of 6.6617%

* INR 4.60 million of Uttar Pradesh's Mar. 29, 2029, and Mar. 21, 2030 bonds were dealt at a weighted average yield of 6.8300-6.9198%

* INR 3.00 million of Telangana's Mar. 22, 2026 bonds were dealt at a weighted average yield of 7.1586%

* INR 1.00 million of Rajasthan's Mar. 31, 2026 bonds were dealt at a weighted average yield of 7.1813%

* INR 0.60 million of Himachal Pradesh's Feb. 28, 2028 bonds were dealt at a weighted average yield of 7.1681%

BENCHMARK LEVELS FOR CORPORATE BONDS:

End

Edited by Tanima Banerjee

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