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Informist, Tuesday, Dec. 9, 2025

By J. Navya Sruthi

MUMBAI – Yields on corporate bonds across tenures were up 4-10 basis points in the secondary market Tuesday, tracking a rise in government bond yields, with mutual funds selling bonds after traders scaled back expectations of further rate cuts by the Reserve Bank of India, dealers and fund managers said. Market participants are pricing in the current repo rate of 5.25% as the terminal rate, after the RBI's Monetary Policy Committee cut the repo rate by 25 bps Friday, dealers said.

Dealers and fund managers said the "incremental capacity" for a rate cut at the next meeting of the rate-setting panel in February has reduced. While transmission of the rate cut was seen after the panel made its first cut of 2025 in February, fund managers do not see a drastic fall in yields after the latest cut of 25 bps.

"There are multiple reasons for this (rising yields). Specific large sellers in cash markets, lack of aggressive buying, and FII (foreign institutional investor) sales (in the gilts market) and mutual funds selling longer tenor (bonds) and no aggressive buying by insurance companies (in the corporate bonds market, weighed on prices)," a fund manager at a brokerage firm said.

In the gilts market, the erstwhile 10-year benchmark 6.33%, 2035 gilt yield hit 6.62%, the highest level since Sept. 1, as foreign banks and portfolio investors were selling gilts and paying fixed rates on overnight indexed swaps.

In the secondary market, deals aggregating to INR 144.60 billion were recorded on the National Stock Exchange and BSE combined, up significantly from INR 96.40 billion Monday. Paper issued by National Bank for Agriculture and Rural Development, REC, Telangana State Industrial Infrastructure Corp., Kerala Infrastructure Investment Fund Board, UGRO Capital, Muthoot Fincorp, Krazybee Services, Navi Finserv, Telangana State Industrial Infrastructure Corp., and Power Finance Corp. were traded the most.

In the primary market, Power Finance Corp. and Small Industries Development Bank of India withdrew their issuances as investors demanded higher coupons, dealers said. Of the total INR-132.35-billion issuances scheduled for the day, Power Finance Corp. and SIDBI's issuances added up to INR 115 billion. Power Finance Corp. was scheduled to raise INR 35 billion by issuing 15-year bonds. SIDBI had planned to raise INR 80 billion through bonds maturing Apr. 11, 2029.

This is the second time in a fortnight that Power Finance Corp. has withdrawn an issuance. On Nov. 25, the state-owned company had planned to raise up to INR 30 billion through the reissuance of bonds maturing on Apr. 13, 2029, but scrapped it because investors were seeking a higher coupon rate. 

According to the bid books accessed by Informist, SIDBI received 75 bids for a total amount of INR 87.95 billion, with coupon rates ranging from 6.67% to 6.99%. Power Finance Corp. received 63 bids for a total amount of INR 64.63 billion, with coupon rates ranging from 6.95% to 7.38%. The market had expected the cut-off to be around 6.87% for SIDBI, but the company expected the coupon to be around 6.76%, participants said. Similarly, Power Finance Corp. had expected the coupon to be 7.10-7.12%, but the market had expected the cut-off rate to be around 7.18%.

While the issuers expected borrowing costs to be cheaper after the RBI's 25-bp rate cut Friday, the reality turned out to be different. Investors still bid at higher rates. 

For Wednesday, issuances aggregating to INR 55.10 billion have been scheduled. Bank of India, Housing and Urban Development Corp., and Hinduja Leyland Finance plan to raise funds in the primary market. Dealers expect the coupon on Bank of India's Basel-III-compliant additional tier-II bonds to be in the range of 7.20-7.25%. 

UDAY BONDS

None of the Ujwal DISCOM Assurance Yojana bonds were traded in the secondary market for the second straight day Tuesday, according to data on the RBI's Negotiated Dealing System-Order Matching system.

BENCHMARK LEVELS FOR CORPORATE BONDS

End

With inputs from Aaryan Khanna

Edited by Rajeev Pai and Ashish Shirke

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