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Informist, Tuesday, Jun. 3, 2025

By Vaishali Tyagi

MUMBAI – Yields on corporate bonds remained steady in the secondary market on Tuesday, as market participants adopted a wait-and-watch approach ahead of the Reserve Bank of India's Monetary Policy Committee meeting due Friday, dealers said. Trading was limited to requirement-based transactions, despite a pick-up in volume. Investors are waiting for a fresh supply of bonds into the primary market and subsequently into the secondary market to deploy their funds, they said.

Dealers added that market participants have already priced in a 25-basis-point rate cut, and any surprise move, such as 50-bps cut, could trigger significant market movement. With expectations largely factored in, secondary market investors are waiting for new issuances, particularly from state-owned entities or large financial institutions, to hit the market. 

"It looks like the fall in yields (movement) has taken a pause, we expect the market to be in a narrow range until Friday (MPC meeting outcome) as traders are avoiding placing large bets," a dealer at a mid-sized brokerage said. "We don't see any major cue before that to push the yields in any direction, there should be something to play upon which is not the case, currently."

The Reserve Bank of India's Monetary Policy Committee is widely expected to lower the policy repo rate by 25 bps for the third consecutive meeting on Friday, according to a poll of 14 economists and treasury officials polled by Informist. Thirteen respondents anticipate a rate cut to 5.75% from the current 6.00%, aimed at supporting growth amidst a challenging global environment and stable inflation. However, some market participants expect a deeper cut of 50 bps. Any deviation from the widely anticipated 25 bps—on either side—could lead to a corresponding market reaction. 

In the secondary market, deals aggregating INR 194.19 billion were recorded on the National Stock Exchange and BSE combined on Tuesday, sharply up from INR 96.97 billion Monday. "Participants from across segments participated in the market today (Tuesday)," the dealer quoted above said. Mutual funds along with a handful of insurance companies were majorly seen buying the bonds across tenures, while banks, arrangers, and primary dealers actively sold the bonds. The selling was seen primarily in three- and five-year tenures, dealers said. Pension funds were also seen trading papers in the market, dealers added. 

Papers issued by REC, Tata Capital Housing Finance, Indian Railway Finance Corp., Porteast Investment, Power Finance Corp., National Bank for Agriculture and Rural Development, Bajaj Finance, Can Fin Homes, Poonawalla Fincorp., Sundaram Finance, and Kotak Mahindra Prime were the most traded on the exchanges. 

On the primary market side, issuances remained subdued Tuesday. A handful of non-banking financial companies borrowed funds from the market. On Wednesday, several NBFCs and housing financiers are lined up to tap the market. Frequent issuer like Bajaj Housing Finance, Poonawalla Fincorp, and Aadhar Housing Finance are amongst a few who have invited bids to raise funds through their respective bond issuances. Multinational mining company, Vedanta Ltd., has invited bids to raise INR 56.0 billion through three bonds of different maturities. Two state-owned entities, Rajgarh Transmission Ltd. and Housing & Urban Development Corp. Ltd. has also invited bids to raise funds via five-year and three-year bonds, respectively. 

UDAY BONDS

In the secondary market, Ujwal DISCOM Assurance Yojana bonds aggregating to INR 13.70 million were traded at a weighted average yield of 5.7275-6.7420%, data from the Reserve Bank of India's Negotiated Dealing System–Order Matching System showed Tuesday.

* INR 45.00 million of Tamil Nadu's Feb. 22, 2030 bonds were dealt at a weighted average yield of 6.7420%

* INR 4.70 million of Rajasthan's Feb. 7, 2027 and Jun. 23, 2025 bonds were dealt at a weighted average yield of 5.7275-6.1521%

BENCHMARK LEVELS FOR CORPORATE BONDS:

End

Edited by Tanima Banerjee

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