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Informist, Wednesday, Jun. 4, 2025

By Vaishali Tyagi

MUMBAI – Yields on corporate bonds remained steady in the secondary market Wednesday as traders refrained from taking aggressive positions ahead of the outcome of the Reserve Bank of India's Monetary Policy Committee meeting Friday, dealers said. Most participants limited their activity to meeting their basic portfolio requirements.

"The upcoming monetary policy is expected to provide clarity to the market, which will lead to increased activity in corporate bonds as traders will have a more active and clear stance," said a fund manager at a mid-sized mutual fund. "The market was active today (Wednesday) and volume was also fine, but there was no market-moving activity. Instead, demand and supply dynamics balanced each other out, resulting in a no change in yields."

A poll of 14 economists and treasury officials by Informist indicates that the Monetary Policy Committee is widely expected to lower the policy repo rate by 25 basis points for the third consecutive time. Thirteen respondents anticipate a rate cut to 5.75% from 6.00%, aimed at supporting growth amidst a challenging global environment and stable inflation. However, some market participants expect a deeper 50 bps cut. Any deviation from the expected 25 bps rate cut could trigger a market reaction.

Dealers said investors are trading mainly on account of high liquidity surplus in the banking system. As indicated by the RBI's net absorption of funds from the banking system, systemic liquidity stood at a surplus of INR 3.01 trillion on Tuesday, the highest level since July 2022.

"Clearly, trades are happening, but they're relatively fine as people usually abstain ahead of the central bank's meeting. This time, expectations of a 25 bps cut are so clear that people have already positioned accordingly, even though they're cautious," the fund manager quoted above said. "The rate cut will come when it's supposed to, but markets have already factored it in. Anything out of the way will be a surprise factor."

In the secondary market, deals aggregating INR 149.74 billion were recorded on the National Stock Exchange and BSE combined on Wednesday, down from INR 194.19 billion Tuesday. Mutual funds and some insurance companies were seen buying and selling bonds across tenures, while banks and pension funds sold the bonds but in low volume. The selling was seen primarily in three- and five-year tenures, dealers said.

Papers issued by REC, Indian Railway Finance Corp., National Bank for Financing Infrastructure and Development, LIC Housing Finance, Power Finance Corp., Telangana State Industrial Infrastructure Corp., and National Bank for Agriculture and Rural Development were the most traded on the exchanges.

In the primary market, state-owned Housing & Urban Development Corp. Ltd. Wednesday raised INR 7.5 billion at a coupon of 6.52% through a three-year bond.

In the coming days, several companies are set to raise around INR 170.08 billion from the corporate bond market. On Thursday, Cholamandalam Investment and Finance Co., a frequent issuer, has invited bids to raise INR 17.50 billion by reissuing its May 2027 bond. Grasim Industries will tap the market to raise INR 10 billion by issuing the five-year bond. Other companies like 360 One Prime, Macrotech Developers, and SMFG India Home Finance Co. have also invited bids to raise funds.

Merchant bankers anticipate an increase in primary market issuances once the rate trajectory becomes clearer after the RBI monetary policy meeting outcome. "With the first two months of the financial year 2025-26 (Apr-Mar) already passed, banks are likely to tap the market to raise funds," a dealer at a mid-sized brokerage firm said. "Both state-owned banks and private sector banks are expected to raise funds from the corporate debt market soon."

UDAY BONDS

In the secondary market, Ujwal DISCOM Assurance Yojana bonds aggregating INR 1.27 billion were traded at a weighted average yield of 6.2271-7.3945%, data from the Reserve Bank of India's Negotiated Dealing System–Order Matching System showed Wednesday.

* INR 617.72 million of Rajasthan's Jun. 23, 2026; Jun. 23, 2025; and Mar. 15, 2026 bonds were dealt at a weighted average yield of 6.2271-7.3838%

* INR 325.00 million of Haryana's Mar. 31, 2026 and Jun. 15, 2026 bonds were dealt at a weighted average yield of 7.3817-7.3945%

* INR 115.00 million of Uttar Pradesh's Mar. 21, 2027 and Mar. 21, 2029 bonds were dealt at a weighted average yield of 6.7619-7.0902%

* INR 100.00 million of Punjab's Mar. 31, 2029 bonds were dealt at a weighted average yield of 7.0460%

* INR 40.00 million of Madhya Pradesh's Mar. 22, 2030 bonds were dealt at a weighted average yield of 7.0486%

* INR 33.50 million of Telangana's Mar. 7, 2031 bonds were dealt at a weighted average yield of 6.7616%

* INR 36.15 million of Tamil Nadu's Feb. 22, 2029 and Feb. 22, 2030 bonds were dealt at a weighted average of 6.7620-7.0478%

BENCHMARK LEVELS FOR CORPORATE BONDS:

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Nishant Maher and Ashish Shirke

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