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Informist, Thursday, May 21, 2026

By Nandini Sinha

MUMBAI – Yields on corporate bonds ended sharply higher and were above the crucial 8% mark Thursday, tracking the rise in Indian government bond yields after a Bloomberg report that the Reserve Bank of India was considering a repo rate hike to stabilise the rupee. Selling pressure by mutual funds also pushed up the yields on corporate bonds. 

Papers issued by public sector undertakings were actively traded for the second consecutive day and papers in the 2029 and 2030 segments were most actively traded. Insurance companies and pension funds were the most active buyers of corporate bonds, while mutual funds actively bought and sold the papers.

The yield on the benchmark 10-year 6.48%, 2035 Indian government bond settled at 7.11%, up nearly 4 basis points from Wednesday. The yields on the three-year bonds of the National Bank for Agriculture and Rural Development were 8.0-8.05%, up 22 bps from 7.83-7.93% Wednesday. NABARD's five-year bonds received offers of 8.05%, up 10 bps from 7.88-7.95% Wednesday. The indicative yield on the 10-year NABARD bonds was 8.01-8.05%, up 15 bps from 7.88-7.90% Wednesday. 

"In the morning, the bonds were traded at yesterday's (Wednesday) levels. The market had improved...the market got weak after the (RBI rate hike) report," a dealer at a public sector bank said. A Reuters report that Iran's supreme leader has directed that the country's enriched uranium must not be sent abroad also weighed on the market sentiment and kept yields on corporate bonds at higher levels, the dealer said.

Bonds worth INR 7 billion were issued Thursday, sharply down from INR 92.65 billion of papers issued Wednesday. In the secondary market, deals aggregating INR 61 billion were recorded on the National Stock Exchange and BSE combined at 1500 IST, up from INR 54.86 billion at the same time Wednesday.

Among the actively traded bonds, INR 12.26 billion of NABARD bonds were traded and INR 5.6 billion worth of REC papers were traded. Papers issued by the Small Industries Development Bank of India, Bajaj Finance Ltd., Muthoot Fincorp Ltd., and Kerala Infrastructure Investment Fund Board were also actively traded. 

On Friday, Edel Finance Co. Ltd. will seek bids to raise INR 1.5 billion through the reissue of three-year one-month zero-coupon bonds, while Asirvad Micro Finance Ltd. plans to raise up to INR 1.5 billion through the issuance of two-year bonds.

Market participants expect the yields on corporate bonds to remain elevated and even rise during the remainder of the month. "Mutual funds have redemption pressure in the month-end...so rates are going to be up," the dealer at the public sector bank said. "They (mutual funds) are willing to sell at any level." 

Mutual funds have been the major sellers in the corporate bond market this week. "Mutual funds are also making space for FRBs (floating rate bonds), as we see more such issuances in pipeline," a fund manager at a domestic mutual fund said. From Friday to Thursday, INR 97.25 billion worth of floating rate bond issuances were recorded. 

Companies may put a hold on bond issuances if the rates keep rising, a dealer at another public sector bank said. "It is difficult for even investors to lock at these rates in FRBs (floating rate bonds)," the dealer said. "If g-sec (10-year benchmark 6.48%, 2035 Indian government security) crosses 7.15% resistance level...then I am not sure," the dealer said while talking about how much higher the Indian government bond yields could rise.

If the yield on the benchmark 10-year Indian government bond crosses the 7.15% mark, the next resistance level could be over 10 bps higher at 7.24-7.25%, the dealer at the second bank said. "The way uncertainties are rising because of geopolitical reasons, the way crude prices are moving...all these factors may affect (the yields on the Indian government bonds and corporate bonds)," the dealer said.

A total of INR 120.68 billion worth of deals in corporate bonds were recorded on the National Stock Exchange and BSE combined, up from INR 111.83 billion Wednesday.

UDAY BONDS

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

BENCHMARK LEVELS FOR CORPORATE BONDS:

End

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

With inputs from J. Navya Sruthi

Edited by Akul Nishant Akhoury

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