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Informist, Friday, Jun. 27, 2025

By Vaishali Tyagi

MUMBAI – Yields on corporate bonds were broadly steady in the secondary market Friday as traders continued to reshuffle portfolios due to lack of fresh domestic or global triggers, dealers said. Traders are reallocating their positions mostly in shorter-tenure bonds, according to the dealers.

"Quarter-end portfolio churning by mutual funds and corporate entities was there but it was not significant enough to move the yield," a dealer at a mid-sized brokerage said. "Meanwhile, yields were expected to rise due to selling by mutual funds under redemption pressure, but the impact was offset as the RBI's variable rate reverse repo operations drained liquidity, slowing down the overall trades."

The Reserve Bank of India Friday set a cut-off at 5.49% at the seven-day variable rate reverse repo auction while accepting all INR 849.75 billion bids received. "The subscription was higher than anticipated, exceeding 80%, whereas many participants didn't expect it to go beyond 50%. Now, with a potential slight dip in liquidity, it may impact participation in the corporate bond market."

On Friday, trade volume in the secondary market was lower, with deals aggregating to INR 106.48 billion recorded on the National Stock Exchange and BSE combined, compared with INR 127.79 billion Thursday. Mutual Funds were said to be aggressively selling bonds across tenures due to their portfolio requirement, dealers said. Insurance companies were net buyers of bonds in longer tenures. Other participants, including private sector banks, state-owned banks, and pension funds, sold and bought bonds across tenures, as per the dealers. "Mutual funds actively sold in some papers due to redemption papers while some mutual funds also bought based on the requirement, and other participants (state-owned banks and insurance companies) reallocated their positions and mostly bought," said the dealers.

Several non-banking financial companies were lined up to raise funds from the corporate debt market Friday, however, the deals were not confirmed till the time of reporting. On Monday, the last working day of the month, Kotak Mahindra Investments will tap the corporate bond market to raise INR 7.5 billion by two bonds of different maturities. Kosamattam Finance has invited bids to raise up to INR 750 million by issuing bonds maturing on Dec 26, 2027, and Arman Financial Services has sought bids to raise INR 420 million through five-year bonds.

Dealers expect there might be a lull in issuances in the Jul-Sept quarter initially, but they expect activity to pick up eventually. Banks are likely to dominate the issuance in primary market, given that ICICI Bank was the only bank to raise funds in the first quarter. No other state-run lender has tapped the debt market in the Apr-Jun quarter... "We've seen a flurry of issuances in the primary market, and most of the borrowing plans for Apr-Jun have been executed, but we may see banks in next quarter." 

Recently, Indian Bank and Canara Bank got approvals to raise funds through corporate bond market. State Bank of India is expected to lead a debt fundraising cycle for state-run lenders in coming months, Reuters reported Friday. SBI plans to raise INR 50 billion through a Basel III-compliant tier II bond issue in the next couple of months. The bond issue is likely to have a 10-year or 15-year maturity, the report said.

BENCHMARK LEVELS FOR CORPORATE BONDS:

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Edited by Subhojit Sarkar

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