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Informist, Friday, May 15, 2026

 

By Nandini Sinha

 

MUMBAI – Corporate bond yields ended sharply higher Friday, tracking a rise in crude oil prices and rates on short-term debt instruments, dealers said. Yields also rose in line with higher Indian government bond yields, they said. Papers maturing up to three years were the most actively traded, with mutual funds seen selling bonds on redemption pressure. At 1716 IST, Brent crude oil futures for July delivery traded at $108.22 per barrel, much higher than $105.72 a barrel traded Thursday.

 

The three-year bonds of the National Bank for Agriculture and Rural Development were traded at 7.80-7.85%, up over 12 basis points from 7.68-7.72% Thursday, while rates on the five-year NABARD bonds were up over 12 bps at 7.85-7.90% from 7.73-7.77% Thursday. The indicative rates on the 10-year NABARD bonds were 7.83-7.85%, up over 5 bps from 7.78-7.80% Thursday, dealers said. The yield on the benchmark 6.48%, 2035 government bond ended at 7.06% Friday, up over 4 bps from Thursday.

 

Bonds worth INR 29.25 billion were issued Friday, sharply up from INR 5 billion Thursday. Volumes rose in the secondary market during the day as investors were getting lucrative rates, but fell towards closing hours. "NABARD got bids at 7.79% (for base size of INR 20 billion)...if someone is getting 7.85% in the secondary market, then obviously the investor will go there," a dealer at a big state-owned bank said. In the secondary market, deals aggregating INR 100.82 billion were recorded on the National Stock Exchange and BSE combined Friday, down from INR 105.82 billion. 

 

NABARD scrapped its reissue of bonds maturing on Jul. 17, 2029 as investors demanded higher yields. According to the bid books accessed by Informist, NABARD received 39 bids totalling INR 30.30 billion, with the coupon ranging from 7.62% to 8.04%. The base issue of INR 20 billion was priced at a yield of 7.65%. "NABARD wanted to raise 7,000 crore (INR 70 billion), but got bids worth just 3,000 crore (INR 30 billion). It shows that the market is not very keen to invest at these levels and NABARD withdrawing shows the issuer is not comfortable borrowing at these levels," the dealer quoted above said.  

 

Oil marketing companies are actively raising funds via commercial papers, dealers said. On Friday, Hindustan Petroleum Corp. Ltd. raised INR 5.75 billion through a three-month CP at 6.78%, according to data from the Clearing Corp. of India Ltd. 

 

On Tuesday, Hindustan Petroleum Corp. raised INR 5 billion through a three-month CP at 6.78%, while Indian Oil Corp. Ltd. mopped up INR 17 billion through a one-month CP at 6.26%, dealers said. ONGC Petro Additions Ltd. raised INR 4 billion through a CP maturing on Aug. 10 at 6.93%, according to data available on Clearing Corp. of India. 

 

Institutional investors such as the Employees' Provident Fund Organisation likely did not participate at the NABARD auction, dealers said. "Had they been there, NABARD would have gotten full subscription," the dealer said. "Very few bids were placed for 700-800 crore (INR 7 billion-INR 8 billion)...it shows institutional investors were likely absent."

 

Market participants are divided over whether NABARD will issue corporate bonds soon after withdrawing its reissue Friday. "They have to come (with bond issuance)...a five- or seven-year maturity (bond) has to be refinanced through the same maturity...they cannot be financed through short-term debt (instruments)," the dealer at the public sector bank quoted above said. "It will depend on how the market reacts...depending on G-secs (government securities), bond yields and crude levels."

 

However, a dealer from a private sector bank was of the view that NABARD is likely to raise funds through short-term debt instruments in the coming days. "To match their inflows with outflows, it (NABARD) is likely to issue CDs. Investors are getting lucrative rates on CD-CPs," the dealer said.  

 

On Friday, NABARD raised INR 45.75 billion through a three-month CP at 7.00%. It had raised around INR 57 billion through a three-month CP on Thursday, an official at the state-owned institution had said. Whether NABARD raises funds through CDs or CPs would depend on their immediate liquidity needs. "Nowadays, CD and CP rates are almost the same. There is just 5–7 bps difference," the dealer at the private sector bank quoted above said.

 

The National Bank for Financing Infrastructure and Development had set a coupon of 7.74% on 10-year bonds maturing on May 14, 2036 at the auction Wednesday. Comparing NaBFID's bond issuance with NABARD's reissue Friday, dealers said that investors demanded higher rates at NABARD's auction as the latter comes up with issuances more frequently. "NABARD comes more often with issuances...when occurrences are more it shows they are in dire need of money," the dealer at the private-sector bank said.

 

Among the actively traded bonds Friday, INR 6.65 billion worth of Bajaj Finance's bonds were traded and INR 5.4 billion worth of NABARD's papers were traded. Papers issued by the Small Industries Development Bank of India, IIFL Finance Ltd., the Andhra Pradesh Mineral Development Corp. Ltd., and Vadraj Cement Ltd. were also actively traded.

 

On Monday, Mahindra & Mahindra Financial Services Ltd. will tap the market to raise up to INR 30 billion through three-year bonds. Mahindra & Mahindra Financial Services is raising funds through floating-rate bonds. "Fixed bonds have high rates...in such a (volatile) market you can get a price reset after two-three months," the dealer at the state-owned bank said about companies issuing floating-rate bonds. Sundaram Finance plans to raise up to INR 10 billion through the reissue of the February 2028 bonds, while Toyota Financial Services India Ltd. has sought bids for INR 3 billion through the issuance of two-year bonds.  

 

Yields on corporate bonds may rise Monday, tracking the rise in the yields on government bonds after the benchmark 10-year bond closed at 7.06% Friday, the highest closing level since Apr. 2. "Maybe its effect could be seen on corporate bonds on Monday," the dealer at the public sector bank said.  

 

UDAY BONDS

No Ujwal DISCOM Assurance Yojana bond was traded Friday, according to data on the RBI's Negotiated Dealing System-Order Matching system.

 

BENCHMARK LEVELS FOR CORPORATE BONDS:

 

Tenure	Friday	Thursday
Three-year	7.80-7.85%	7.68-7.72%
Five-year	7.85-7.90%	7.73-7.77%
10-year	7.83-7.85%	7.78-7.80%

 

End

 

US$1 = INR 95.97

 

Edited by Tanima Banerjee

 

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