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Informist, Friday, Jun. 20, 2025

By Vaishali Tyagi

MUMBAI – Corporate bond yields in the secondary market rose 3-4 basis points on Friday as some mutual funds and corporate entities sold bonds across tenures on concerns about rising tensions between Israel and Iran, dealers said. Investors were cautious and tracking the situation in West Asia, they said.

The conflict entered its second week Friday, with Israel bombing Iranian nuclear facilities and Iran retaliating with missile attacks, striking an Israeli hospital Thursday. Russian President Vladimir Putin and Chinese President Xi Jinping have expressed concern and condemned Israel on Thursday, while seeking de-escalation. Meanwhile, US President Donald Trump said he would decide within two weeks on whether the US will join Israel in the conflict. 

"The market saw dull volumes today, with most trading activity on the selling side, which pushed yields higher. People are saying it is due to Iran-Iraq turmoil, and I think until this is not settled, this fluctuation (in yield levels) will carry on," a fund manager at a mid-sized mutual fund house said. "Some buying interest later offset part of the impact."

Yields in the secondary market rose during early trade as some investors sold bonds to make room for the Power Finance Corp. bond issuance in the primary market. However, investors, who were unable to secure allocations in the primary market, re-entered the secondary market, limiting the rise in yields.

Friday, trade volume in the secondary market was significantly lower with deals aggregating to INR 70.29 billion recorded on the National Stock Exchange and BSE combined, compared with INR 105.27 billion Thursday. Mutual Funds and some corporates were active in selling papers across tenures. Insurance companies were active on both the selling and buying sides, especially in shorter tenure bonds, dealers said. Pension funds were largely absent from the corporate debt market, dealers said. 

Papers issued by Bajaj Finance, Small Industries Development Bank of India, Kerala Infrastructure Investment Fund Board, REC, and HDB Financial Services were traded the most on the bourses Friday.

In the primary market, activity remained low on Friday with just one major bond issuance. Power Finance Corp. raised INR 48.75 billion by reissuing two bonds. The company accepted bids aggregating to INR 24.50 billion at a yield of 6.60% on bonds maturing on Jul. 15, 2027. According to the bid book accessed by Informist, the company got 53 bids totalling INR 39 billion for the 2027 bond, with yields ranging from 6.45% to 6.65%. 

The Maharatna company also accepted bids aggregating to INR 24.25 billion at a yield of 6.85% on bonds maturing on Jul. 15, 2030. According to the bid book, the company got 65 bids totalling INR 40.75 billion for the 2030 bond, with the yields ranging from 6.72% to 6.93%. 

"PFC got higher-than-expected levels as the government bond yields in shorter bonds also rose," the dealer quoted above said." We were expecting the 5-year coupon to be in the range of 6.75%-6.78%... similarly, for the 2027 paper, we were expecting the cut-off to be around 6.55%-6.57%." 

On Monday, REC will tap the corporate bond market to raise INR 70.00 billion through two bonds of different maturities. 

Dealers said traders are exercising caution due to the escalating conflict in West Asia, which contributed to a decline in trading volumes on Friday. Market participants are adjusting their positions in anticipation of sustained volatility.

UDAY BONDS

Ujjwal DISCOM Assurance Yojana bonds were not traded in the secondary market on Friday, as per the Reserve Bank of India's Negotiated Dealing System–Order Matching System.

BENCHMARK LEVELS FOR CORPORATE BONDS:

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Edited by Saji George Titus

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