More Stories

Informist, Friday, Jun. 5, 2026

 

By Nandini Sinha

 

MUMBAI – Yields on corporate bonds slumped Friday after the Reserve Bank of India's Monetary Policy Committee retained its neutral stance and announced a series of measures to attract foreign capital inflows, dealers said. While traders were not expecting a rate hike, the neutral stance retained by the MPC strengthened market sentiment, they said. The Reserve Bank of India's Monetary Policy Committee left the policy repo rate unchanged at 5.25% in a unanimous decision. 

 

Dealers said a handful of foreign institutional investors were seen buying corporate bonds, which pushed yields lower. Banks and mutual funds were the most active participants, with papers maturing in up to three years being the most actively traded.

 

Yields on three-year bonds issued by the National Bank for Agriculture and Rural Development were 7.70-7.75%, down 7-10 basis points from 7.82% Thursday. The indicative yields on NABARD's five-year bonds were over 20 bps lower at 7.58-7.60% from 7.80-7.85% Thursday. NABARD's 10-year bonds were traded at 7.75%, down 5 bps from the indicative level of 7.80% Thursday.

 

The government has exempted foreign institutional investors from paying capital gains tax on investment in government bonds in a bid to attract foreign investment. FIIs have also been exempted from paying withholding tax on interest income. The RBI will also include new issuances of 15-, 30- and 40-year Indian government bonds under the Fully Accessible Route to enhance participation by foreign portfolio investors in government securities. These measures are "long-term positive" for the corporate bond market, a dealer at a private sector bank said. "It will lead to structural changes (in the corporate bond market)," the dealer said. 

 

These measures from the central bank will draw in foreign sovereign wealth funds and other long-term players to the Indian debt market. This will deepen the domestic debt market, and corporate bonds will benefit since they move in tandem with Indian government bonds, dealers said. "Such structural changes will make the corporate bond market more mature," the dealer said.

Deals worth INR 74.56 billion were recorded on the National Stock Exchange and BSE combined at 1500 IST, sharply higher than INR 46.80 billion at the same time Thursday. Among the actively traded papers, INR 24.86 billion of NABARD bonds and INR 8.8 billion of the Small Industries Development Bank of India bonds were traded. Papers issued by Bajaj Housing Finance Ltd., Indian Railway Finance Corp. Ltd., and REC Ltd. were actively traded.

 

Bonds worth INR 17 billion were issued Friday, down from INR 31 billion worth of papers issued Thursday. On Monday, REC Ltd. will tap the market to raise up to INR 30 billion through bonds maturing on Feb. 28, 2029. The issue has a base size of INR 5 billion and a greenshoe option of INR 25 billion. Indel Money Ltd. will seek bids to raise INR 1 billion through three-year bonds. Mufin Green Finance Ltd. plans to raise INR 1 billion through bonds maturing in September 2027. 

 

While yields fell sharply after the MPC decision, they rose 5 bps during the latter half of trading hours, dealers said. Market participants are divided over the trajectory of corporate bond yields next week. While some expect yields to remain down and close to Friday's levels, others expect them to correct and rise due to concerns about inflation.

 

"Inflation is going to be the highest in third quarter (Oct-Dec). It's going to be 5.9%," a dealer at a large public sector bank said. "(I) expect g-sec (Indian government securities) yields to consolidate by 10 bps and corporate bonds (yields) to consolidate by 10-15 bps with an upward bias." 

 

A total of INR 184.37 billion worth of deals were recorded on the National Stock Exchange and BSE combined, sharply higher than INR 103.85 billion Thursday. 

 

UDAY BONDS

In the secondary market, one Ujwal DISCOM Assurance Yojana bond worth INR 1 million was traded Friday, according to data on the RBI's Negotiated Dealing System-Order Matching System.

* INR 1 million of Punjab's 8.47%, 2029 bond was dealt at 7.3807%

 

BENCHMARK LEVELS FOR CORPORATE BONDS: 

 

Tenure	Friday	Thursday
Three-year	7.70-7.75%	7.82%
Five-year	7.58-7.60%	7.80-85%
10-year	7.75%	7.80%

 

End

 

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

 

With inputs from Vaishali Tyagi

Edited by Avishek Dutta

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

 

Informist Media Tel +91 (22) 6985-4000 

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2026. All rights reserved.