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Informist, Wednesday, Jan. 28, 2026

By Vaishali Tyagi

NEW DELHI – Corporate bond yields edged marginally higher in the secondary market on Wednesday as mutual funds sold bonds across tenures to meet redemption pressure, dealers said. Other players, including insurance companies, banks, and pension funds, also offloaded bonds amid tight banking system liquidity, they said. The net liquidity absorbed from the banking system by the Reserve Bank of India--a proxy for the liquidity surplus--was INR 569.87 billion Monday, up from INR 520.53 billion Sunday but down from INR 636.49 billion Friday.

Market participants said rising short-term debt market rates are pushing corporate bond yields higher. They said that rates on commercial papers and certificates of deposit are rising due to asset-liability mismatches, huge rollover requirements in Oct-Dec, and uptick in credit growth, leading to higher supply of short-term money market instruments. This is pushing rates higher, with a spillover effect seen in the corporate bond market. Dealers said this trend is likely to continue in the near term, with market participants keeping a close eye on liquidity conditions and credit demand.

"A combination of tight liquidity and heavy rollovers is pushing short-term rates up, and it's impacting corporate bond yields also (pushing yields higher)," a fund manager at a mutual fund house said. "MFs were selling across tenures but most trading happened in shorter tenure segment. Liquidity needs to remain firmly positive for few more days...then we will see stabilisation in rates."

Participants from various segments actively traded in bonds in the secondary market, boosting volumes. Mutual funds, insurance companies, and banks were seen selling papers across tenures, with concentration in shorter segment. Pension funds and corporates were also seen selling shorter tenure bonds. Wednesday, volume in the secondary market on the National Stock Exchange and BSE combined was INR 111.38 billion, significantly higher from INR 65.14 billion Tuesday.

Bonds issued by Canara Bank, State Bank of India, Bank of Baroda, Indian Overseas Bank, Kerala Infrastructure Investment Fund Board, Andhra Pradesh State Beverages Corp., Indian Railway Finance Corp., The Andhra Pradesh Mineral Development Corp., Motilal Oswal Financial Services, India Infrastructure Finance Co., Andhra Pradesh State Beverages Corp., and Electronica Finance were traded the most.

Activity in the primary remained subdued Wednesday, with volume falling to INR 10.30 billion from INR 22.65 billion on Tuesday. Dealers expect activity in the primary market to remain mixed ahead of the Union Budget for 2026-27 (Apr-Mar) and the meeting of the Reserve Bank of India's Monetary Policy Committee next week.

On Thursday, bond issuances worth INR 92 billion are lined up. A good number of non-banking financial companies and the National Bank for Agriculture and Rural Development are set to raise funds from the debt market. NABARD has invited bids to raise up to INR 70 billion through bonds maturing on Feb. 23, 2029. Dealers expect coupon on the bonds to be in the range of 7.25-7.30%. On Dec. 29, NABARD had scrapped the same bond issuance as investors demanded a higher coupon. "We expect the EPFO (the Employees' Provident Fund Organisation) to participate heavily in NABARD bond issuance," a fund manager at another mutual fund house said.

Other big issuers include Summit Digitel Infrastructure which plans to raise INR 7 billion by issuing bonds maturing in 10 years and Lloyds Metals and Energy that plans to raise up to INR 6 billion by issuing bonds maturing in five years.

UDAY BONDS

In the secondary market, two Ujwal DISCOM Assurance Yojana bonds were traded Wednesday, according to data on the RBI's Negotiated Dealing System-Order Matching system.

* INR 100.00 million of Tamil Nadu's 7.72%, 2026 bond was dealt at 5.8537%

* INR 3.00 million of Uttar Pradesh's 8.35%, 2029 bond was dealt at 6.6156%

BENCHMARK LEVELS FOR CORPORATE BONDS

End

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

Edited by Ashish Shirke

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