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Informist, Tuesday, Aug. 5, 2025

 

By Vaishali Tyagi

 

MUMBAI – Yields on three-year corporate bonds ended 1-2 basis points lower in the secondary market Tuesday, tracking the slight fall in some shorter-tenure Indian government bond yields, as traders expect a softer policy outcome by the Reserve Bank of India's Monetary Policy Committee Wednesday and placed bets on rate cuts by the panel later in the year, dealers said. However, yields on five- and 10-year corporate bonds remained broadly unchanged.

 

The yield on the 3-year 7.06%, 2028 government bond ended at 5.81%, down from the previous close of 5.84%. However, the volume in this segment was very low. "We did not see much rally in the (corporate bond) market as such, if we see from yield terms, like there is a very slight fall (in yields), that too in shorter tenure paper tracking the marginal fall in shorter-tenure G-sec (government security) paper yields," a dealer at a mid-sized broking firm said.

 

Buying interest from mutual funds in shorter tenure paper, majorly in the three-year segment, ahead of the Monetary Policy Committee's decision pulled yields down. Dealers are divided in their expectations, with some anticipating a 25 bps rate cut and others expecting the policy rate to remain unchanged.

 

The panel began its meeting Monday and will announce its decision Wednesday. State Bank of India, in its report, has batted for a rate cut since a lower interest rate regime before Diwali will result in better credit growth. As per the report, cutting rates now will result in frontloaded transmission as well. The RBI's rate-setting panel has already slashed the repo rate by 100 bps so far in 2025 to 5.50%.

 

Trade volume in the secondary market was lower Tuesday, with deals aggregating to INR 114.40 billion recorded on the National Stock Exchange and BSE combined, compared with INR 121.85 billion Monday. Mutual funds were seen buying paper aggressively in the three-year segment. Banks, too, bought paper in the same segment. A handful of insurance companies were seen buying and selling bonds maturing in 1-3 years while arrangers and primary dealers actively bought and sold bonds across tenures in light volume. The activity was seen primarily in three- and five-year tenures, dealers said. 

 

"They (mutual funds) were buying the shorter-tenure paper quite aggressively during the day, which brought down yields, but some sell-off alo happened from banks' side, which pushed yields back (up)," a dealer at another brokerage said. "A good number of participants were seen in the market, which added to the volume as well."

 

Paper issued by REC Ltd., Housing And Urban Development Corp. Ltd., ICICI Home Finance Ltd., Apex Homes Pvt. Ltd., Cholamandalam Investment and Finance Co. Ltd., Power Finance Corp. Ltd., National Bank for Agriculture and Rural Development, Small Industries Development Bank of India, and India Infrastructure Finance Co. Ltd. were traded the most on the exchanges.

 

In the primary market, bond issuances are expected to pick up after the policy announcement. A few companies were scheduled to raise funds Tuesday. Wednesday, some companies plan to raise funds through corporate bond issuances totalling to INR 52.06 billion. Kerala Infrastructure Investment Fund Board plans to raise INR 15.00 billion through a bond maturing in 10 years. Tata Communications Ltd. has invited bids to raise INR 10.00 billion through a bond maturing in three years. Apart from these, traders are eyeing issuances by Cholamandalam Investment, HDB Financial Services Ltd., and Aditya Birla Capital Ltd., due Wednesday.

 

UDAY BONDS

In the secondary market, Ujwal DISCOM Assurance Yojana bonds aggregating to INR 167.50 million were traded at a weighted average yield of 6.2523-6.7476%, according to data from the RBI's Negotiated Dealing System-Order Matching System.

 

* INR 44.00 million of Uttar Pradesh's 8.75%, 2030 bond was dealt at a weighted average yield of 6.5834%

* INR 30.00 million of Uttar Pradesh's 8.49%, 2028 bond was dealt at a weighted average yield of 6.3483%

* INR 25.20 million of Uttar Pradesh's 8.71%, 2028 bond was dealt at a weighted average yield of 6.3548%

* INR 13.00 million of Uttar Pradesh's 8.38%, 2027 bond was dealt at a weighted average yield of 6.3698%

* INR 10.00 million of Uttar Pradesh's 8.70%, 2027 bond was dealt at a weighted average yield of 6.3705%

* INR 11.30 million of Telangana's 8.08%, 2029 bond was dealt at a weighted average yield of 6.4672%

* INR 10.00 million of Rajasthan's 8.21%, 2026 bond was dealt at a weighted average yield of 6.2523%

* INR 7.50 million of Chattisgarh's 8.70%, 2031 bond was dealt at a weighted average yield of 6.7098%

* INR 3.00 million of Tamil Nadu's 7.75%, 2032 bond was dealt at a weighted average yield of 6.6769%

* INR 2.50 million of Tamil Nadu's 7.75%, 2028 bond was dealt at a weighted average yield of 6.3965%

* INR 1.00 million of Tamil Nadu's 7.78%, 2031 bond was dealt at a weighted average yield of 6.7476%

* INR 10.00 million of Punjab's 8.66%, 2028 bond was dealt at a weighted average yield of 6.3578%

 

BENCHMARK LEVELS FOR CORPORATE BONDS: 

 

Tenure	TUESDAY	MONDAY
Three-year	6.66-6.68%	6.67-6.70%
Five-year	6.79-6.82%	6.80-6.82%
10-year	7.05-7.08%	7.05-7.07%

 

End

 

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

 

Edited by Rajeev Pai

 

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