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Informist, Wednesday, Mar. 18, 2026

By J. Navya Sruthi and Nandini Sinha

MUMBAI – Yields on three-year corporate bonds fell slightly Wednesday due to limited trading volumes and need-based buying, dealers said. Secondary market volumes were lower due to limited participation by banks, dealers said. However, yields on corporate bonds in other segments were largely steady due to limited participation, dealers said. They expect yields to rise this month due to the existing liquidity crunch in the banking system.

Dealers said mutual funds were seen buying bonds maturing in 2028, which led to a slight fall in yields in the segment. This also led to lower yields in other segments of corporate bonds. Dealers said investors were adding three-year and five-year bonds due to higher returns.

"We are still not sure about Friday's holiday. There are chances for Id (Id-ul-Fitr) to be on Friday, so I think mutual funds will sell next week for GST payments. But this week we saw them buying in limited segments," a dealer at a domestic brokerage firm said.

A few dealers said mutual funds were selling in the secondary market due to redemption pressure from banks ahead of outflows for goods and services tax payments. On Wednesday, deals aggregating to INR 118.61 billion were recorded on the National Stock Exchange and BSE combined in the secondary market, down from INR 145.06 billion Tuesday.

There was no major activity in the market as banks were not interested in buying corporate bonds, a dealer at a state-owned bank said. "Mostly mutual funds were on the selling side due to redemption pressures. Expect some activity from banks in the first week of April," the dealer said.

Going ahead, dealers expect yields on corporate bonds to rise by 10 to 15 basis points from current levels due to low liquidity surplus in the banking system and higher supply in the primary market. Market participants expect INR 1.8 trillion to INR 2.0 trillion outflows for GST payments starting Friday.

"Liquidity crunch is problem right now and yields are expected to harden further by five to 10 bps in March," a dealer at a private sector bank said. "There was a VRR (variable rate repo auction) but it was underwhelming. I think RBI (Reserve Bank of India) may come up with another VRR, shorter tenure one this time so that banks will participate," the dealer said.

"If bond yields go further up, PFs (provident funds) can carry out distressed selling as they have sufficient cash," a dealer at another private sector bank said. Dealers expect the RBI to announce liquidity measures to support liquidity in the banking system. The net liquidity absorbed by the RBI from the banking system -- a proxy for systemic liquidity surplus -- was INR 819.64 billion Tuesday, lower than the comfortable INR-1-trillion level, but up from INR 754.84 billion Monday.

Market participants will now take cues from the US Federal Open Market Committee's rate decision and commentary due at 2330 IST. "Regarding the FOMC meeting, we are expecting no surprises to come. However, the market has performed so far, it's going to be the same. Personally, I don't see any dovish tone in the meeting," a dealer at another state-owned bank said.

Papers issued by Edelweiss Financial Services, UGRO Capital, Namra Finance, Trent, Navi Finserv, Cholamandalam Investment and Finance, Motilal Oswal Financial Services, National Bank for Agriculture and Rural Development, Bajaj Finance, The Andhra Pradesh Mineral Development Corp., IFL Finance, Telangana State Industrial Infrastructure Corp., India Infrastructure Finance, and Small Industries Development Bank of India were traded the most in the secondary market.

In the primary market, issuances aggregating INR 85.70 billion are lined up for Friday, lower from INR 118.40 billion Wednesday. Union Bank of India plans to raise up to INR 75 billion through 10-year infrastructure bonds. The market expects the coupon to be around 7.10%.

UDAY BONDS

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

* INR 8.0 million of Chhattisgarh's 8.27%, 2026 bond was dealt at 6.8573%

BENCHMARK LEVELS FOR CORPORATE BONDS:

End

With inputs from Meera Nair

Edited by Ashish Shirke

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