More Stories

Informist, Wednesday, Aug. 6, 2025

 

By Vaishali Tyagi

 

MUMBAI – After the Reserve Bank of India's Monetary Policy Committee left the repo rate unchanged at 5.50% Wednesday and retained its GDP growth forecast of 6.5% for the financial year 2025-26 (Apr-Mar), yields on corporate bonds maturing in three years and five years surged 4-5 basis points while yields on 10-year paper rose 2-3 bps. Traders rushed to sell short- and mid-tenure paper after RBI Governor Sanjay Malhotra did not indicate any scope for further rate cuts, dampening market sentiment.

 

A sell-off was witnessed in corporate bonds, driven by traders unwinding their positions, particularly in shorter tenure bonds. Traders pared bets of rate cuts in the December quarter after the central bank did not lower its GDP growth estimate for FY26. "Sell-off happened because traders had expected guidance on future rate cuts from RBI Governor Sanjay Malhotra during the monetary policy announcement... since the fundamental outlook remains unchanged, traders who had bought bonds prior to the policy decision opted to unwind their positions," a fund manager at a mutual fund house said.

 

Yields on corporate bonds also rose tracking, with a lag, significant upward movement in yields on government securities, dealers said. Yields on gilts shot up as several traders had expected a rate cut of 25 bps and a 10-20 bps cut in the GDP growth forecast for FY26. The 10-year benchmark 6.33%, 2035 gilt closed at 6.42% yield, against 6.33% Tuesday. The 7.06%, 2028 gilt closed at 5.90%, against 5.81% the previous day.

Market participants had also expected the RBI to cut its CPI inflation forecast for FY26. The RBI lowered its inflation projection for FY26 by 60 bps to 3.1%. However, Malhotra said core CPI inflation is expected to remain moderately above 4% in FY26. For the first time, the RBI also gave its CPI inflation projection for the June quarter of FY27, projecting it at 4.9%. 

 

Wednesday, in the secondary market for corporate bonds, participants sold bonds across segments. Mutual funds were the major sellers, followed by banks and a handful of corporate entities, dealers said. A few insurance companies were also seen selling bonds across tenures but in low volumes. Many arrangers were also seen trading across tenures.

 

Despite the participation of traders from different segments, overall volume growth was low. Deals aggregating to INR 108.48 billion were recorded on the National Stock Exchange and BSE combined, marginally lower than INR 114.40 billion reported Tuesday. Paper issued by REC Ltd., Tata Capital Housing Finance, Indian Railway Finance Corp. Ltd., Apex Homes, National Bank for Agriculture and Rural Development, Bajaj Housing Finance Ltd., and Small Industries Development Bank of India 

were traded the most.

 

In the primary market Thursday, bond issuances are expected to pick up after the RBI's policy announcement. "Market was waiting for clarity on rate trajectory from governor's comments in this policy, majorly things are on expected lines in terms of rate trajectory scenario as market widely expected a pause on rate cuts. Therefore we expect some recovery in bond issuances. PSUs (public-sector undertakings) may tap soon," a dealer at a broking firm said. 

 

Wednesday, some companies were in line to raise funds through corporate bond issuances totalling to INR 52.06 billion. However, the number of issuances that will tap the market Thursday are fewer. Kerala Infrastructure Investment Fund Board plans to raise INR 15.00 billion through a bond maturing in 10 years. Axis Finance has invited bids to raise INR 2.50 billion through a bond maturing in 10 years. Aditya Birla Digital Fashion Ventures will tap the debt market to raise INR 1.00 billion through a two-year bond. Apart from these, bond issuances from Truhome Finance, Akara Capital Advisors, and Paisalo Digital are also due Thursday.

 

UDAY BONDS

In the secondary market, Ujwal DISCOM Assurance Yojana bonds aggregating to INR 128.70 million were traded at a weighted average yield of 6.3391-6.7707%, according to data from the RBI's Negotiated Dealing System-Order Matching System.

 

* INR 30.00 million of Uttar Pradesh's 8.49%, 2028 bond was dealt at a weighted average yield of 6.3426%

* INR 25.20 million of Uttar Pradesh's 8.71%, 2028 bond was dealt at a weighted average yield of 6.3486%

* INR 19.00 million of Uttar Pradesh's 8.38%, 2027 bond was dealt at a weighted average yield of 6.5782%

* INR 10.00 million of Uttar Pradesh's 8.70%, 2027 bond was dealt at a weighted average yield of 6.3605%

* INR 9.20 million of Uttar Pradesh's 8.77%, 2031 bond was dealt at a weighted average yield of 6.7707%

* INR 13.00 million of Tamil Nadu's 7.75%, 2028 bond was dealt at a weighted average yield of 6.3391%

* INR 11.30 million of Telangana's 8.08%, 2029 bond was dealt at a weighted average yield of 6.4631%

* INR 10.00 million of Punjab's 8.66%, 2028 bond was dealt at a weighted average yield of 6.3517%

* INR 1.00 million of Rajasthan's 8.21%, 2026 bond was dealt at a weighted average yield of 6.3470%

 

BENCHMARK LEVELS FOR CORPORATE BONDS:

 

Tenure	WEDNESDAY	TUESDAY
Three-year	6.68-6.73%	6.66-6.68%
Five-year	6.81-6.86%	6.79-6.82%
10-year	7.08-7.12%	7.05-7.08%

 

End

 

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

 

Edited by Rajeev Pai

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

 

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2025. All rights reserved.