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Informist, Tuesday, Aug. 26, 2025

By Vaishali Tyagi

MUMBAI – Yields on corporate bonds in the secondary market ended higher Tuesday due to selling pressure from mutual funds facing redemption, dealers said. A few insurance companies also sold bonds to manage their portfolio, which pushed yields higher, they added. "We saw selling as we saw mutual funds sold to fulfill their redemption requirement," a dealer at a brokerage firm said. 

The yield on the 10-year benchmark bond issued by the National Bank for Agriculture and Rural Development rose by 5-7 basis points. Yields on three-year and five-year bonds rose by 3-4 bps. Traders attributed this rise in yields to sustained selling by mutual funds.

Market participants said that selling pressure in the secondary market was because investors diverted their focus and funds towards primary market issuances, particularly from non-banking financial companies and marquee issuers such as Housing and Urban Development Corp. Ltd.

In the secondary market, deals aggregating to INR 91.86 billion were recorded on the National Stock Exchange and BSE combined on Tuesday, lower than INR 105.24 billion on Monday. Mutual funds were seen active on both selling and buying sides, however, their trades were concentrated in short-term paper maturing in three years, dealers said. Insurance firms and banks were also active but their participation was largely subdued, they said. Pension funds were largely absent from the market. 

Papers issued by Rural Electrification Corp. Ltd., Indian Railway Finance Corp. Ltd., ICICI Home Finance Co. Ltd., LIC Housing Finance Ltd., Power Finance Corp. Ltd., Sammaan Capital Ltd., National Bank For Agriculture And Rural Development, Bajaj Finance Ltd., SMFG India Credit Company Ltd. and Small Industries Development Bank of India were the most traded on exchanges on Tuesday.

In the primary market, traders were keenly eyeing the big-ticket issuance of Housing and Urban Development Corp. Ltd., which had planned to raise up to INR 30.0 billion through a three-year bond. However, the company withdrew the issuance owing to the higher coupon demanded by investors, dealers said. According to the bid book accessed by Informist, the company received 93 bids aggregating INR 68.45 billion with the coupons ranging from 6.74% to 7.07%. The bids received were sharply higher than the last time it tapped the market in July, when the company set a coupon of 6.64% on its three-year bond and accepted bids aggregating to INR 30 billion. "Issuer was not comfortable issuing at higher rates even though such rates were at levels similar to the market," a fund manager at a mid-sized mutual fund house said.

Traders do not expect more public sector entities to tap the market in the near term due to the elevated yield levels in the market. Issuers will likely wait for the borrowing rates to settle before raising funds, they said.

UDAY BONDS

In the secondary market, Ujwal DISCOM Assurance Yojana bonds aggregating to INR 82.40 million were traded at a weighted average yield of 6.3553-67.0030%, according to data from the RBI's Negotiated Dealing System-Order Matching System.

* INR 65.00 million of Jammu and Kashmir's 8.48%, 2029 bond was dealt at a weighted average yield of 7.0030%

* INR 6.60 million of Uttar Pradesh's 8.49%, 2028 bond was dealt at a weighted average yield of 6.6325%

* INR 5.00 million of Uttar Pradesh's 8.38%, 2027 bond was dealt at a weighted average yield of 6.3553%

* INR 5.00 million of Tamil Nadu's 7.74%, 2031 bond was dealt at a weighted average yield of 6.8478%

* INR 0.80 million of Rajashthan's 8.39%, 2026 bond was dealt at a weighted average yield of 6.7000%

BENCHMARK LEVELS FOR CORPORATE BONDS: 

End

Edited by Akul Nishant Akhoury

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