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Informist, Thursday, Jun. 5, 2025

By Vaishali Tyagi

MUMBAI – Yields on three-year and five-year corporate bonds fell 2-3 basis points in the secondary market Thursday, tracking the fall in Indian government bond yields, dealers said. However, the yields on 10-year corporate bonds remained broadly unchanged. 

The yield on the 3-year 7.06%, 2028 government bond ended at 5.71%, down from the previous close of 5.73%, while the yield on the 5-year 6.75% 2029 government bond closed at 5.84%, down 2 bps from 5.85% on Wednesday. "There was no rally in the (corporate bond) market as such, if we see from yield terms, like there is a very slight fall (in yields) that too in shorter tenure paper tracking the G-sec (government security) yields," a dealer at a mid-sized brokerage firm said. 

Yields on government bonds fell as traders covered short bets ahead of the Monetary Policy Committee's decision Friday. The market widely expects the Reserve Bank of India's Monetary Policy Committee to cut the policy repo rate by 25 bps to 5.75%. Traders also expect the RBI to lower the inflation forecast for 2025-26 (Apr-Mar) and asymmetrically widen the corridor between the repo rate and the Standing Deposit Facility rate, dealers said. 

According to a poll of 14 economists and treasury officials by Informist, 13 respondents expect the repo rate to be cut by 25 bps to support growth amidst global challenges and stable inflation. A small section of the market also sees a deeper 50 bps cut. Any deviation from the expected 25 bps cut could trigger some market reaction, dealers said.

Traders avoided significant positions and remained cautious ahead of the monetary policy outcome. "Trades are taking place, but at a limited pace because of pre-central bank meeting (outcome) caution, which is the typical trend," the dealer quoted above said. "Given the consensus around a 25 bps rate cut, market participants have largely factored this in, though they're still being cautious. The expected rate cut is already priced in, so any unexpected move like a jumbo rate cut (50 bps cut) would likely take the market off guard." 

In the secondary market, deals aggregating INR 159.38 billion were recorded on the National Stock Exchange and BSE combined on Thursday, up from INR 149.74 billion Wednesday. Mutual funds and some insurance companies bought heavily across tenures, while banks and pension funds sold bonds. The selling was seen primarily in three- and five-year tenures, dealers said.

Papers issued by Indian Railway Finance Corp., National Bank for Agriculture and Rural Development, Bajaj Finance, Muthoot Finance, Canara Bank, Poonawalla Fincorp, India Infradebt, Small Industries Development Bank of India, and HDB Financial Services were the most traded on the exchanges.

Several companies were due to raise funds from the corporate debt market Thursday though the details could not be confirmed. On Friday, two companies will tap the market to raise funds through bonds. Highways Infrastructure Trust has invited bids to raise INR 9.0 billion by issuing a 2041 bond, while Muthoot Capital Services will tap the market to raise INR 750 million by issuing the November 2026 bond. Going forward, merchant bankers expect primary market issuances to increase once the rate trajectory becomes clearer after the RBI monetary policy meeting outcome. 

UDAY BONDS

In the secondary market, Ujwal DISCOM Assurance Yojana bonds aggregating INR 15.47 million were traded at a weighted average yield of 6.1499-6.3916%, data from the Reserve Bank of India's Negotiated Dealing System–Order Matching System showed Thursday.

* INR 922.00 million of Rajasthan's Jun. 23, 2026; Jun. 23, 2025; and Feb. 7, 2027 bonds were dealt at a weighted average yield of 6.1500-6.3916%

* INR 325.00 million of Haryana's Mar. 31, 2026 and Jun. 15, 2026 bonds were dealt at a weighted average yield of 6.1499-6.1500%

* INR 300.00 million of Uttar Pradesh's Mar. 21, 2027 and Mar. 29, 2026 bonds were dealt at a weighted average yield of 6.2202-6.3349%

BENCHMARK LEVELS FOR CORPORATE BONDS:

End

Edited by Saji George Titus

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