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Informist, Friday, Dec. 5, 2025

By J. Navya Sruthi

MUMBAI – Yields on corporate bonds ended largely steady from the previous day with a slight negative bias after falling around 5 basis points during the day, dealers said. Yields fell earlier in the day as the Reserve Bank of India cut the repo rate, but they recovered as market participants took profits, dealers said.

"There was 4-5 bps (downward) rally in yields after RBI's rate cut. But later there was rebound in yields as (the) rate cut was (already) factored in (by the market)," a dealer at a broking firm said. Also, there was no change in stance of the RBI's Monetary Policy Committee, which supported yields, the dealer said.

A dealer at a big state-owned bank said mutual funds and banks took profits amid redemption pressure, which supported yields. However, a few banks and mutual funds were also on the buying side, with higher volumes seen in bonds with three-year tenure, the dealer said.

Market participants expect government bond yields to fall by 10-15 bps from current levels following the rate cut. Other liquidity measures, such as open market operations, announced by the RBI will also weigh on yields, dealers said. The fall in government bond yields can push corporate bonds yields lower, they said.

On the other hand, a senior official at a housing finance company said there is a healthy supply of new issuances in the primary market for corporate bonds, which is likely to weigh on bond prices, pushing yields higher. The official said the company was not expecting the rate cut, given the pace of GDP growth.

Till Thursday, the market was divided on whether the RBI would cut the policy rate. A few participants and experts expected a rate cut as they saw the December meeting as the final chance to cut interest rates. Others expected a status quo because of the strong GDP data for the September quarter. The section that did not expect a rate cut had also expected dovish comments by the RBI and a change in stance from "neutral" to "accommodative".

The Monetary Policy Committee lowered the repo rate by 25 bps to 5.25% in a unanimous decision. It retained the "neutral" policy stance though external member Ram Singh was of the view that it should be changed to "accommodative". RBI Governor Sanjay Malhotra announced that the central bank would buy government securities of INR 1 trillion through open market operations and also conduct a three-year dollar/rupee buy/sell swap of $5 billion this month to inject durable liquidity into the system.

Deals aggregating to INR 128.04 billion were recorded on the National Stock Exchange and BSE combined Friday, up marginally from INR 114.30 billion Thursday. Paper issued by Vivriti Capital, Earlysalary Services, REC, Vedika Credit Capital, Indian Railway Finance Corp., Krazybee Services, Shriram Finance, Akara Capital Advisors, Keertana Finserv, The Andhra Pradesh Mineral Development Corp., Muthoottu Mini Financiers, Muthoot Capital Services, Power Finance Corp., and UGRO Capital were traded the most on the exchanges Friday.

In the primary market, issuances aggregating to INR 10.46 billion were scheduled Friday, down from INR 19.10 billion Thursday. Nirmal Bang Securities, Sammaan Capital, and Paisalo Digital have invited bids to raise funds Monday. Issuances aggregating to INR 6.65 billion are scheduled for Monday. Next week, Power Finance Corp. will raise up to INR 35 billion through a bond maturing Dec. 11, 2040. Small Industries Development Bank of India will raise up to INR 80 billion through a bond maturing Apr. 11, 2029.

Participants expect primary market activity to now pick up, driven by cheaper borrowing costs after the rate cut, with investors taking advantage of ample liquidity. "We expect a rise in bond issuances next week onwards, as we saw some announced immediately after policy outcome and more may follow suit," a dealer at a broking firm said.

UDAY BONDS

In the secondary market, four Ujwal DISCOM Assurance Yojana bonds aggregating to INR 34.20 million were traded, according to data on the RBI's Negotiated Dealing System-Order Matching system Friday.

* INR 11.20 million of Uttar Pradesh's 8.77%, 2031 bond was dealt at 7.1428%

* INR 11.00 million of Haryana's 8.18%, 2026 bond was dealt at 6.3862%

* INR 7.00 million of Telangana's 7.96%, 2032 bond was dealt at 7.1332%

* INR 5.00 million of Telangana's 7.81%, 2027 bond was dealt at 6.4496%

BENCHMARK LEVELS FOR CORPORATE BONDS

End

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

With inputs from Vaishali Tyagi

Edited by Rajeev Pai

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