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Informist, Friday, Dec. 19, 2025

By J. Navya Sruthi

MUMBAI – Yields on corporate bonds ended steady in the secondary market Friday due to a lack of fresh cues, dealers said. Market participants expect rates to remain range-bound, with a slight upward bias through month-end, due to weak demand and redemption pressure from mutual funds.

Dealers said more volumes were seen in two- and three-year tenure bonds due to the attractive returns in this segment. "NABARD Sept. 2028 bond dealt at 6.89% later rose to 6.94% and then closed at 6.92%," a dealer at a brokerage firm said. There is currently more demand for three-year bonds, while mutual funds are selling one- and two-year bonds amid redemption pressure ahead of goods and services tax payments. The spillover from rising yields on one- and two-year bonds has led to a slight increase in three-year yields, too, the dealer said.  

"Mutual funds were seen buying two- and three-year bonds since the Reserve Bank of India's 25-basis-point rate cut in December after selling longer-tenure bonds and one-year bonds," a dealer at a state-owned bank said. The 5.25% repo rate cut is widely seen as the terminal rate, making three-year bonds attractive to mutual funds. "Yields on three-year bonds are almost 160 basis points higher than repo, which is also the case with government short-term bonds," the dealer said. 

Overall buying sentiment has weakened in the market as the liquidity in the banking system remained in deficit for the past three days, dealers said. The RBI's net injection into the banking system – a proxy for the liquidity deficit – was INR 299.10 billion Thursday, lower than a net injection of INR 685.86 billion Wednesday. "This (weak demand and steady yields) will continue till next month. I can see yields falling only in January once liquidity picks up," the dealer from the state-owned bank said. 

Deals aggregating to INR 135.73 billion were recorded on the National Stock Exchange and BSE combined Friday, marginally up from INR 128.23 billion Thursday. Mutual funds were selling, while a handful of banks were active on both the buying and selling sides across tenures. A few insurance companies were also active on the buying side, primarily in longer-tenure bonds, dealers said.

Paper issued by Telangana State Industrial Infrastructure Corp., Andhra Pradesh State Beverages Corp., Bajaj Housing Finance, Tata Motors Finance, IIFL Finance, Navi Finserv, The Andhra Pradesh Mineral Development Corp., Capri Global Capital, National Bank for Agriculture and Rural Development, Andhra Pradesh State Beverages Corp., Muthoot Fincorp, Muthoottu Mini Financiers, Moneyboxx Finance, and UGRO Capital were traded the most on the bourses. 

In the primary market, companies issued bonds worth over INR 9.20 billion, down sharply from INR 43.21 billion Thursday. On Monday, issuances totalling INR 11.25 billion are scheduled, including INR 3 billion by Phoenix Arc through four bonds, up to INR 4.25 billion by Spandana Sphoorty Financial through three bonds, and up to INR 2.5 billion by Krazybee Services through the reissue of bonds Monday. 

Power Finance Corp. and Bank of India plan to raise funds worth INR 160 billion through bonds Tuesday. While Bank of India plans to raise INR 100 billion through 10-year infrastructure bonds, Power Finance Corp. is planning to raise INR 60 billion through two different bonds Tuesday. The market expects a coupon over 7.25% on Bank of India's bonds, given the large size of the issue. 

UDAY BONDS

None of the Ujwal DISCOM Assurance Yojana bonds were traded Friday.

BENCHMARK LEVELS FOR CORPORATE BONDS

End

Edited by Saji George Titus

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