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Informist, Monday, May 19, 2025

By Ashna Mariam George 

MUMBAI – Corporate bond yields fell 2-3 basis points in the secondary market Monday as investors rushed to buy papers in anticipation of a 25-basis-point rate cut by the Reserve Bank of India's Monetary Policy Committee in June, dealers said. "Everyone is building their positions as they are bullish on the market," a dealer at a mid-sized brokerage firm said. 

While mutual funds and foreign banks were the major buyers, public sector banks were sellers Monday, dealers said. Deals aggregating INR 119.97 billion were recorded on the National Stock Exchange and the BSE combined, sharply lower than INR 165.34 billion reported Friday. The most traded papers Monday were those issued by the Telangana State Industrial Infrastructure Corp., HDFC Bank, LIC Housing Finance, and Bajaj Finance. 

Market participants also said they are waiting to take cues from the RBI's Central Board of Directors meeting which is likely to be held Friday. "We are expecting the dividend decision this week, if the government gets good funds (from the RBI), there will be less borrowing...so investors are taking position based on that as well," the dealer quoted above said. 

According to the median estimate of eight economists polled by Informist, the RBI is likely to transfer a record surplus of INR 2.8 trillion to the government for 2024-25 (Apr-Mar). Last year, the government received a then-record INR 2.11-trillion from the central bank as surplus. "We are expecting a huge dividend close to 3 lakh crores (INR 3 trillion)... it has led to a rally in the market across tenures," a senior manager at another brokerage firm said. 

In the government securities market, cut-off prices at the Reserve Bank of India's purchase of gilts through auction under its open market operations were largely along expected lines. Market participants expect the RBI to announce more open market operations in the near term. In April, RBI Governor Sanjay Malhotra had committed to maintain surplus liquidity in the banking system. 

"There is scope for more OMOs, liquidity has to be above 5 lakh crores (INR 5 trillion) at least for smooth and quick transition of rate cuts," a dealer at a large pension fund said. The systemic liquidity on Sunday was above INR 2 trillion, according to RBI data. 

Issuances in the primary market were moderate Monday with no major deals during the day. Tuesday, Power Finance Corp. will tap the market to raise INR 25 billion each through two bonds – one maturing on Jul. 15, 2028 and the other on Jul. 15, 2030. Market participants expect the 2028 bond to sell at 6.66-6.68% and the 2030 paper to bag a coupon of 6.70-72%.

Last month, the power financier had scrapped two issuances worth INR 60 billion due to lower than expected demand. The company planned to raise up to INR 25 billion through bonds maturing on Apr. 16, 2040, and up to INR 35 billion through zero-coupon bonds maturing on Jun. 2, 2035.

Greater Chennai Corp. will also tap the market Tuesday to raise up to INR 2 billion through municipal bonds with staggered redemptions ranging from 6–10 years. 

UDAY BONDS

In the secondary market, Ujwal DISCOM Assurance Yojana bonds aggregating to INR 153.70 million were traded at a weighted average yield of 5.9590-6.0488%, data from the Reserve Bank of India's Negotiated Dealing System–Order Matching System showed Monday.

* INR 150.70 million of Rajasthan's Jun. 23, 2025 bonds were dealt at a weighted average yield of 6.0488%

* INR 3.00 million of Telangana's Mar. 22, 2026 bonds were dealt at a weighted average yield of 5.9590%

BENCHMARK LEVELS FOR CORPORATE BONDS:

End

Edited by Vandana Hingorani

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