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Informist, Tuesday, Jun. 10, 2025

By Vaishali Tyagi

MUMBAI – Yields on corporate bonds in the secondary market rose across tenures as mutual funds and foreign institutional investors sold for profit, dealers said. Some selling pressure was also driven by mutual funds facing redemption pressures, prompting them to offload their holdings of corporate bonds, they added.

"We're seeing more selling than buying, as almost everyone wants to book profits, which pushed the yield levels higher," a dealer at a mid-sized broking firm said. "On top of that, arranger banks are selling underwritten stock from their books, and there has been significant selling by FIIs." The dealer added that trading in longer-tenure paper has slowed, with even the five-year segment witnessing a gradual slowdown, but three-year paper are the most liquid these days.

Market participants expressed caution over the Reserve Bank of India's decision to discontinue the daily variable rate repo auctions from Wednesday and said it would result in uncertainty about liquidity in the banking system. Although the RBI has promised proactive measures to manage liquidity as needed, the announcement added to some selling pressure in the bond market. Monday, the RBI net absorbed INR 2.45 trillion, similar to Sunday, data from the central bank showed.

The market has been highly volatile, with traders actively buying and selling bonds amid fluctuating yields. "The market is very volatile after what happened on Friday (at the outcome of the Monetary Policy Committee meeting)," the dealer quoted earlier said. "Yields are going up and up steadily and selling is there from all corners."

In the secondary market, deals aggregating to INR 168.88 billion were recorded on the National Stock Exchange and BSE combined, up from INR 161.10 billion Monday. Dealers said most of the participants from various segments were present in the market Tuesday. Mutual funds and FIIs sold heavily in the shorter- and mid-year segments. A few state-owned banks and pension funds also sold bonds but in low volumes. There was less activity in the longer-tenure segment, dealers added. 

Paper issued by REC Ltd., Housing and Urban Development Corp. Ltd., Indian Railway Finance Corp. Ltd., LIC Housing Finance Ltd., Telangana State Industrial Infrastructure Corp., National Bank for Agriculture and Rural Development, and Export-Import Bank of India were the most traded on exchanges.

Meanwhile, in the primary market, Credila Financial Services and Muthoot Finance tapped the market to raise a cumulative INR 21.00 billion through bond issuances. However, the deals were not confirmed.

Investors are now keeping an eye on Wednesday's primary market line-up, where many companies are set to raise funds. State-owned entity Indian Oil Corp. Ltd. has invited bids to raise INR 30.00 billion through a five-year bond. Bajaj Housing Finance Ltd., too, will tap the corporate bond market to raise INR 35.00 billion through two bonds. L&T Finance Ltd. aims to raise 18.00 billion through two bonds and has invited bids for the same Wednesday. Other companies, including JSW Energy, Tata Capital Housing Finance, and Dalmia Cement (Bharat) Ltd. are also in line to raise funds from the corporate debt market.

UDAY BONDS

In the secondary market, Uttar Pradesh's Jun. 2, 2027, Ujwal DISCOM Assurance Yojana bonds aggregating to INR 5.00 million were traded at a weighted average yield of 5.9673%, data from the RBI's Negotiated Dealing System–Order Matching System showed.

BENCHMARK LEVELS FOR CORPORATE BONDS:

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Edited by Rajeev Pai

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