India Corporate Bonds
Yields up tracking gilts, redemption pressure sell-off
This story was originally published at 20:58 IST on 23 October 2025
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By Vaishali Tyagi
MUMBAI – Yields on corporate bonds in the secondary market ended 1-2 basis points higher across tenures tracking the uptick in government securities, dealers said. The rise in government bond yields was driven by optimism around India-US trade deal and rising US treasury yields. The 10-year benchmark 6.33%, 2035 gilt closed at a yield of 6.54%, against 6.50% yield, Monday. The yield on the 10-year benchmark gilt ended at its highest level since Oct. 10. During the day, the yield on the bond topped 6.54%, the highest since the Reserve Bank of India's Monetary Policy Committee's decision on Oct. 1.
Dealers said hopes of a US-India trade deal dampened expectation of a rate cut by the MPC in December which led traders to unwind some of their rate cut bets. Market participants also said corporate bond yields rose over 3-4 basis points earlier in the day due to mutual fund redemption pressure which led to some selling but the pressure eased off later.
"Today (Thursday), despite few participants, there was decent activity...some traders came to meet their portfolio requirements after two days of Diwali holidays while others sold to meet redemption pressure, mainly mutual funds," a dealer at a brokerage firm said. "Later towards closing, banks and mutual funds sold corporate bonds as government bond yields rose, narrowing the spread between the two, making it less attractive to hold corporate bonds given the risk." Dealers said corporate bond yields and government bond yields move in tandem, with corporate bonds trading at specific spreads over G-Secs, which remain relatively stable with slight fluctuations based on demand and supply.
In the secondary market Thursday, deals aggregating INR 52.20 billion were reported on the National Stock Exchange and BSE combined, significantly higher than INR 17.56 billion Monday. "Even though volume is higher from Monday, it is still on the lower side as most of the traders have not returned to the market after Diwali holidays, we expect volume to rise from Monday onwards," the dealer quoted above said.
Mutual funds were active on the selling side while a handful of insurance companies and corporates were active on the buying side but were seen dealing in low volumes. Banks were seen active on both the selling and buying sides. Trading took place across tenures Thursday.
Papers issued by Vivriti Capital, REC, Krazybee Services, Keertana Finserv, The Andhra Pradesh Mineral Development Corp., Muthoottu Mini Financiers, Hinduja Leyland Finance, Telangana State Industrial Infrastructure Corp., and National Bank For Agriculture and Rural Development were traded the most on exchanges Thursday.
On Thursday, primary market remained robust with deals aggregating to over INR 42 billion. However, no deal was confirmed till the time of writing this report. On Friday, very few companies are in line to raise funds amounting to INR 10.15 billion. Tata Capital has invited bids to raise up to INR 5 billion through October 2035 bonds. Muthoottu Mini Financiers and Vishal Papertech India will also borrow funds from the corporate debt market.
Merchant bankers expect a surge in bond issuances from banks, manufacturing companies, and NBFCs in next week. Primary market activity should pick up as some state-owned banks and companies got board approvals to issue bonds and ratings for specific amount from rating agencies.
UDAY BONDS
In the secondary market, no Ujwal DISCOM Assurance Yojana bonds were traded at a weighted average yield, according to data on the RBI's Negotiated Dealing System-Order Matching System Thursday.
BENCHMARK LEVELS FOR CORPORATE BONDS:
Tenure | THURSDAY | MONDAY |
Three-year | 6.72-6.74% | 6.69-6.71% |
Five-year | 6.83-6.85% | 6.82-6.84% |
10-year | 7.13-7.16% | 7.12-7.15% |
End
Edited by Subhojit Sarkar
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