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Informist, Thursday, Jun. 19, 2025

By Vaishali Tyagi

MUMBAI – Corporate bond yields in the secondary market ended 4-5 basis points higher across tenures, tracking an upward trend in government securities, dealers said. The surge in government bond yields was triggered by foreign banks taking profits after Wednesday's purchases, following the US Federal Reserve's commentary on rate cuts, which disappointed traders, they said.

"Today's (Thursday's) levels are 4-5 bps above yesterday's, mostly driven by the G-sec (government securities) movement post-US Fed policy," a dealer at a mid-sized brokerage said. "The market reaction to the Fed's stance led to a sell-off in benchmark government bonds which pushed yields up and that effect was also seen on corporate bond yields. We saw active participation on the selling side from mutual funds and insurance companies in longer tenures."

Fed officials' median forecast continued to show two more rate cuts by the end of 2025, though the number of officials expecting no rate cuts in 2025 rose to seven from four. "No one holds these rate paths with a lot of conviction," Fed Chair Jerome Powell said. Additionally, he indicated the risk of higher inflation in the US due to President Donald Trump's tariff policies. He said that "ultimately, the cost of the tariff has to be paid, and some of it will fall on the end consumer".

The upward trend in corporate bond yields was also fuelled by geopolitical uncertainty, as per dealers. The Israel-Iran conflict escalated Thursday, sparking concern among traders about a broader conflict in West Asia. "Geopolitical tensions are adding to the market jitters," one dealer said. "With the escalation in the Israel-Iran conflict, there's a fear that Brent Crude futures could surge further, which would have broader economic implications. This uncertainty is prompting some sell-off in the bond market, contributing to the yield increase."

Thursday, trade volume in the secondary market was down with deals aggregating to INR 46.96 billion recorded on the National Stock Exchange and BSE combined at 1500 IST, as compared to INR 54.80 billion Wednesday. Insurance companies and some mutual funds were active in selling longer-tenure paper. Pension funds were active on both the selling and buying sides across tenures, dealers said. Some mutual funds and a few private companies bought and sold shorter-tenure paper, a few dealers said. Banks were largely absent from the corporate debt market. 

Paper issued by REC Ltd., State Bank of India, The Andhra Pradesh Mineral Development Corp., Power Finance Corp. Ltd., Bajaj Housing Finance Ltd., National Bank for Agriculture and Rural Development, and Small Industries Development Bank of India were traded the most on the bourses.

In the primary market, activity remained moderate Thursday. Friday, Power Finance Corp. will tap the corporate debt market to raise up to INR 50.00 billion through two bond reissues of different maturities. "Investors are eagerly waiting for fresh issuances from state-owned entities, and papers like PFC and REC are always in focus," the dealer quoted above said. "I'm not certain about the yield cut-off, but these issuances are likely to garner a good response from investors."

Along with this, the Gandhinagar Municipal Corp. is slated to raise INR 250.00 million through a five-year bond. Share India Securities Ltd. and Keertana Finserv Pvt. Ltd. have sought bids Friday to raise funds through their respective bonds.

Going forward, dealers said traders are slightly cautious owing to the worsening conflict in West Asia, which led to a slight dip in trading volume Thursday, and they are adjusting their positions in anticipation that market volatility will be sustained.

UDAY BONDS

In the secondary market, Ujwal DISCOM Assurance Yojana bonds aggregating INR 64.50 million were traded at a weighted average yield of 6.6320-7.1433%, data from the Reserve Bank of India's Negotiated Dealing System–Order Matching System showed Thursday.

* INR 54.70 million of Rajasthan's Mar. 15, 2026 and Jun. 23, 2026 bonds were dealt at a weighted average yield of 7.0880-7.1433%

* INR 7.00 million of Telangana's Mar. 7, 2032 bond was dealt at a weighted average yield of 6.7375%

* INR 2.80 million of Tamil Nadu's Feb. 22, 2031 bond was dealt at a weighted average yield of 6.6320%

BENCHMARK LEVELS FOR CORPORATE BONDS:

End

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

With inputs from Srijita Bose

Edited by Subhojit Sarkar

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