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Informist, Friday, Jun. 13, 2025

By Vaishali Tyagi

MUMBAI – Yields on corporate bonds in the secondary market rose further across tenures, driven by selling pressure from mutual funds and insurance companies. Dealers said selling was most prominent in two- to five-year segment, attributing it to risk-off sentiment due to uncertainty led by the Reserve Bank of India's recent policy decisions of change in stance to neutral.   

"The market is uncertain since the policy outcome last week, and mutual funds and other players have sold a lot, leading to a rise in yields," a dealer at a mid-sized brokerage firm said. "Investors are cutting their positions until things stabilise, and we're seeing huge selling activity in the market." 

The RBI's decision to discontinue variable rate repo auctions and change in stance to neutral have also raised concerns about liquidity in the banking system, contributing to the selling pressure. As a result, yields on corporate bonds have risen, showing cautious sentiment among investors.

Merchant bankers said that market participants are focused more on secondary market, expecting lower returns from new bond issuances in the primary market. "Traders are taking significant positions in shorter-tenure bonds, as new bond issuances in the primary market are expected to offer lower returns," the dealer quoted above said. 

In the secondary market Friday, bond deals worth INR 122.13 billion were recorded on the National Stock Exchange and the BSE combined, up from INR 145.95 billion on Thursday. Dealers said most of the participants from various segments were present in the market Friday. Mutual funds and insurance companies 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. Most mutual funds were seen selling actively in higher volume but at the same time some mutual funds and insurance companies bought papers, though in low volume. A handful of pension funds and banks also traded papers by being active on both buying and selling sides.

Papers issued by LIC Housing Finance, Power Finance Corp., National Bank For Agriculture And Rural Development, Navi Finserv, Small Industries Development Bank of India, Kerala Infrastructure Investment Fund Board, and Mahindra & Mahindra Financial Services were the most traded on exchanges.

In the primary market, activity remained low. On Thursday, state-owned entity NTPC's 10-year bond got fully subscribed where it raised INR 40 billion at a coupon of 6.89%. According to the bid book accessed by Informist, the company received 129 bids aggregating INR 160.51 billion in the range of 6.71-7.43%. "I expected the coupon to be around 88-89 (6.88%-6.89%)...it was highly expected by the market also, and these levels were fine," another dealer at a mid-sized brokerage firm said. "They raised the full amount of INR 40 as they planned." 

On Monday, several bond issuances are lined up to raise funds from the market. Piramal Finance will tap the market to raise up to INR 35.0 billion through three bonds of different maturities. Muthoot Capital Services has invited bids to raise INR 1 billion through two-year bonds. Indel Money, Manba Finance, and Krazybee Services will also raise funds from the corporate debt market through their respective bonds. 

A surge in primary market issuances, mostly banks, will tap the market to raise funds on account of ample liquidity in the banking system, dealers added. 

UDAY BONDS

In the secondary market, Ujwal DISCOM Assurance Yojana bonds aggregating INR 38.00 million were traded at a weighted average yield of 6.0318-6.6006%, data from the Reserve Bank of India's Negotiated Dealing System–Order Matching System showed Friday.

* INR 24.00 million of Rajasthan's Mar. 31, 2026 and Mar. 15, 2026 bonds were dealt at a weighted average yield of 6.0318-6.3030%

* INR 7.50 million of Chhatisgarh's Mar. 28, 2031 bonds were dealt at a weighted average yield of 6.4939%

* INR 6.50 million of Tamil Nadu's Feb. 22, 2032, Feb. 22, 2031, and Feb. 22, 2028 were dealt at a weighted average yield of 6.3000-6.6006%

End

Edited by Deepshikha Bhardwaj

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