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Informist, Monday, Jun. 23, 2025

By Vaishali Tyagi

MUMBAI – Yields on corporate bonds rose Monday as mutual funds faced redemption pressure and sold bonds in the secondary market, dealers said. State-owned banks and insurance companies also sold paper across various tenures, which further added to the rise in yields, they said.

The yield on the 10-year benchmark bond issued by the National Bank for Agriculture and Rural Development rose by 2-3 basis points. Similarly, yields on three-year and five-year bonds increased by 2 bps. Dealers attributed this movement to sustained selling from mutual funds.

"Major action (selling) was there by mutual funds due to redemption pressure, and definitely yields have risen," said a fund manager at a mid-size mutual fund house. "Volatility is there in the market and a lot of portfolio churning also happened in shorter tenure." 

Some insurance companies were also active sellers, adding to the market strain and pushing yields higher. However, the rise in yields was partially capped by buying activity from certain private banks and mutual funds, which deployed cash based on requirements. Dealers said buying activity picked up on availability of ample cash with mutual funds and other investors as banking system liquidity remained above INR 2.00 trillion. 

On Monday, trade volume in the secondary market was significantly higher with deals aggregating to INR 47.99 billion recorded on the National Stock Exchange and BSE combined at 1530 IST, compared with INR 30.19 billion Friday. Mutual Funds and state-owned banks were active in selling paper across tenures. Insurance companies were said to be selling in longer segment. Some mutual funds and private banks were active on buying sides, especially in shorter tenure bonds, as per the dealers. Pension funds were largely absent from the corporate debt market, dealers said. 

Papers issued by REC, LIC Housing Finance, Telangana State Industrial Infrastructure Corp., Navi Finserv, and Kotak Mahindra Prime were traded the most on the bourses Monday.

In the primary market, activity remained moderate on Monday with several bond issuances. State-owned REC Ltd. raised INR 68.65 billion through two bonds of different maturities. The company accepted bids aggregating to INR 40 billion at a coupon of 6.60% on bonds maturing on Jun. 30, 2027. According to the bid book accessed by Informist, the company got 97 bids totalling INR 65.15 billion, with the coupon ranging from 6.50% to 6.69%.

The state-owned company also accepted bids aggregating to INR 28.65 billion at a coupon of 7.05% on bonds maturing on Jun. 30, 2035. The company received 61 bids aggregating to INR 47.25 billion and the coupon ranged from 6.78% to 7.15%, according to the bid book accessed by Informist. "REC's both paper got fine levels as it was expected and investors also were interested as even in falling interest rates primary issuances are getting hit on higher yields," the fund manager quoted above said.

On Tuesday, several non-banking financial companies are lined up to raise funds from the corporate debt market. The Andhra Pradesh Mineral Development Corp. will tap the corporate bond market to raise INR 55.2618 billion through reissuance of bonds maturing on May 8, 2035. Tata Capital Housing Finance Ltd. has invited plans to raise up to INR 15 billion through reissuance of bonds maturing on Jul. 24, 2028. Muthoot Capital Services has invited bids to raise INR 1 billion through two-year bonds. Sundaram Home Finance, Edel Finance Co., and Hinduja Leyland Finance will also raise funds from the corporate debt market through their respective bonds.

Merchant bankers expect a surge in primary market issuances as the Apr-Jun quarter-end approaches. With banks and corporate entities looking to meet their quarterly borrowing targets, market participants expect a flurry of new issuances in the coming days, they added. 

UDAY BONDS 

In the secondary market, Ujwal DISCOM Assurance Yojana bonds aggregating INR 24.00 million were traded at a weighted average yield of 6.2370-6.7287%, data from the Reserve Bank of India's Negotiated Dealing System–Order Matching System showed Monday.

* INR 12.20 million of Rajasthan's Jun. 23, 2026 and Feb. 7, 2027 bonds were dealt at a weighted average yield of 6.2370-6.3036%

* INR 7.00 million of Telangana's Mar. 7, 2032 bond was dealt at a weighted average yield of 6.7287%

* INR 2.80 million of Tamil Nadu's Feb. 22, 2031 bond was dealt at a weighted average yield of 6.6220%

* INR 2.00 million of Jharkhand's Mar. 30, 2031 bond was dealt at a weighted average yield of 6.6508%

BENCHMARK LEVELS FOR CORPORATE BONDS:

End

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

Edited by Subhojit Sarkar

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