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Informist, Thursday, May 15, 2025

By Ashna Mariam George

MUMBAI – The corporate bond market saw a busy Thursday as most participants sought to lock in yields amid growing expectation of a rate cut by the Reserve Bank of India's Monetary Policy Committee in June. This followed the release of April's consumer price index inflation data, which came in at 3.16%, a 69-month low and below the RBI's 4% target for the third consecutive month.

Yields on corporate bonds fell 3-5 basis points across tenures due to aggressive demand from banks, mutual funds, and insurance companies, dealers said. On the selling side, some pension funds and a few banks were active, they said.

"A lot of buying happened today (Thursday), it was a good day to buy due to a lower-than-expected CPI and imminent rate cuts," a dealer at a mid-sized brokerage firm that mostly deals in the secondary market said. The CPI data released Tuesday has strengthened hopes of a 25-basis-point rate cut by the RBI in June. 

Dealers said they expect more rate cuts after the June policy as well. "The market is bullish and right now we expect three cuts in the current year," a dealer at a large mutual fund house said. "There is enough scope to see the rate at 5.25% by the end of the (calendar) year." The RBI had in its April policy lowered the policy rate by 25 bps to 6.00%. 

Market participants also took note of a positive sentiment in the market. "The economy is picking up, inflation is down, and the monsoon is expected earlier and stronger," a senior manager at a Mumbai-based brokerage firm said. "All these are expected to give a boost to businesses, especially in the MFI (microfinance) sector."

Trade volume in the secondary market rose to INR 204.51 billion on Thursday from INR 214.73 billion on Wednesday, according to data from the National Stock Exchange and the BSE combined. Most traded papers Thursday include those issued by the National Bank for Agriculture and Rural Development, the Small Industries Development Bank of India, the Telangana State Industrial Infrastructure Corp., LIC Housing Finance, and Bajaj Housing Finance.

Issuances in the primary market were moderate with only one major issue during the day. Non-banking finance company Sundaram Finance raised INR 12 billion through bonds maturing in three years at a coupon of 7.18%. On Friday, Indian Railway Finance Corp. will tap the market to raise INR 30 billion through bonds maturing in five years. Market participants expect the issue to sell at a coupon of 6.70-6.74%. 

UDAY BONDS

In the secondary market, Ujwal DISCOM Assurance Yojana bonds aggregating to INR 12 million were traded at a weighted average yield of 6.3526-6.6971%, data from the RBI's Negotiated Dealing System–Order Matching System showed Thursday.

* INR 7 million of Telangana's Mar. 7, 2032 bonds were dealt at a weighted average yield of 6.6971%

* INR 5 million of Uttar Pradesh's Jun. 2, 2027 bonds were dealt at a weighted average yield of 6.3526%

BENCHMARK LEVELS FOR CORPORATE BONDS:

End

Edited by Subhojit Sarkar

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