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Informist, Tuesday, Dec. 16, 2025

By Vaishali Tyagi

MUMBAI – Yields on corporate bonds in the secondary market remained in a narrow band with slight upward pressure Tuesday as mutual funds sold bonds amid reduced liquidity in the banking system due to continued outflows for advance tax payments, dealers said. Some participants sold bonds for cash while others stayed on the sidelines, they said.

Dealers see outflows of around INR 800 billion for advance tax payments Tuesday. Outflows for advance tax payments have drained liquidity from the banking system. According to market estimates, between INR 700 billion and INR 1 trillion was paid for advance tax Monday. The central bank's net absorption from the banking system--a proxy for the liquidity surplus--was INR 1.20 trillion Monday, down from INR 1.83 trillion Sunday. The fall was also because of the maintenance of 100% cash reserve ratio by banks Saturday and Monday.

Earlier in the day, there was buying demand from pension funds and insurance companies but in low volumes, which kept yields on bonds steady across tenures. However, later in the day, selling pressure from some mutual funds and banks pushed yields up 1 or 2 basis points, dealers said. "Corporate (bonds) are not so reactive (these days)... and yields in short-end moved slightly higher due to selling by some banks and mutual funds," a dealer at a broking firm said.

Apart from this, trading activity in the secondary market was limited to a churning of portfolios. Dealers said weak demand in the secondary market amid low liquidity in the banking system is pushing yields higher. Going forward, they expect yields to fall. "In January, yields will ease as liquidity (in the banking system) will improve and credit disbursements will also reduce as it is the start of a new quarter," said a dealer at a state-owned bank. "I see yields correcting by 10-12 bps (basis points)." 

Deals aggregating to INR 122.84 billion in the secondary market were recorded on the National Stock Exchange and BSE combined Tuesday, up slightly from INR 119.39 billion Monday. Mutual funds and banks actively sold paper across tenures, with more pronounced buying demand in shorter-tenure paper. Companies were active in the secondary market to buy and sell bonds. A few insurance companies and pension funds were also actively buying bonds.

Paper issued by the National Bank for Agriculture and Rural Development, Keertana Finserv, Krazybee Services, REC, Shri Ram Finance Corp., The Andhra Pradesh Mineral Development Corp., Telangana State Industrial Infrastructure Corp., Power Finance Corp., and Hinduja Leyland Finance were traded the most on the bourses Tuesday. 

In the primary market, companies issued bonds worth over INR 32.65 billion, down from INR 56.15 billion Monday. Wednesday, issuances aggregating to INR 4.18 billion are scheduled. Hinduja Leyland Finance will raise INR 500 million by reissuing bonds maturing on Jun. 4, 2035. Nuvama Wealth Finance will raise up to INR 1 billion through Apr. 18, 2028, bonds. Nuvama Wealth and Investment plans to raise up to INR 1 billion through the reissuance of bonds maturing Jan. 4, 2028. Emkay Global Financial Services, Varthana Finance, and Kosamattam Finance will also raise funds Wednesday. 

Dealers said primary issuances are scarce currently as yields are slightly on the higher side. Some non-banking companies are opting for short-term debt instruments while others are waiting for rates to fall. Merchant bankers believe issuance activity will pick up if borriwing rates come down. 

UDAY BONDS

In the secondary market, three Ujwal DISCOM Assurance Yojana bonds aggregating to INR 32.40 million were traded, according to data on the RBI's Negotiated Dealing System-Order Matching system Tuesday.

* INR 15.00 million of Chhattisgarh's 8.70%, 2031 bond was dealt at 7.06275%

* INR 14.40 million of Uttar Pradesh's 8.77%, 2031 bond was dealt at 7.126%

* INR 3.00 million of Uttar Pradesh's 8.35%, 2029 bond was dealt at 6.6248%

BENCHMARK LEVELS FOR CORPORATE BONDS

End

Edited by Rajeev Pai

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