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Informist, Monday, Jun. 8, 2026

 

By Nandini Sinha

 

MUMBAI – Yields on corporate bonds ended lower Monday as market sentiment got a boost from the Reserve Bank of India's Monetary Policy Committee measures announced Friday, which are expected to improve foreign inflows, dealers said. The decline in Indian government bond yields and crude oil prices also contributed to the fall in corporate bond yields.

 

Foreign institutional investors have been actively buying corporate bonds after the Reserve Bank of India Friday announced a series of measures to boost capital inflows, dealers said.

 

The RBI and government announced a slew of measures on Friday, including a concessional forex swap facility to incentivise external commercial borrowings by public sector units and a hedging facility for banks to raise foreign-currency non-resident deposits. In addition, the government exempted foreign institutional investors from paying capital gains tax on investment in government bonds. The government also exempted FIIs from paying any withholding tax on interest on such investments. 

 

Yields on three- and five-year bonds fell sharply Monday. The yield on three-year bonds issued by the National Bank for Agriculture and Rural Development fell by over 20 basis points to 7.48-7.53%. The yield on NABARD's five-year bonds fell 5 bps to 7.52-7.55%, while the indicative yield on 10-year bonds declined to 7.70-7.73% from 7.75% Friday. 

 

Yields on short-term bonds rose 2-3 bps intraday during the last trading hours due to selling by mutual funds and a handful of banks. The selling was seen after NABARD announced the reissue of bonds. NABARD plans to raise up to INR 70 billion through the reissue of its 7.44% July 2029 bonds. "Positive momentum continued till the evening, but there was a slight uptick (in yields) after NABARD reissuance (announcement)," a dealer at a public sector bank said.

Mutual funds and private-sector banks were active Monday, trading in papers issued by non-banking finance companies and financial institutions. "The rally (fall in corporate bond yields) has not been the same in PSUs (public sector undertakings) and NBFCs (non-banking finance companies)," the public sector bank dealer said. While yields on the PSU bonds have fallen 30–40 bps, NBFCs' papers have fallen by 20-25 bps, the dealer said. 

 

Bonds worth INR 32.30 billion were issued Monday, sharply up from INR 17 billion worth of papers issued Friday. Monday, REC raised INR 30 billion through bonds maturing on Feb. 28, 2029, at a coupon of 7.38%, payable annually.  Mutual funds and foreign institutional investors are likely to have bought REC bonds, market participants said. "The participation was spectacular," the PSU bank dealer said. "We were expecting 45 levels (7.45% cut-off), but good participation brought it (down) to 7.38%." 

 

On Tuesday, Trust Investment Advisors will tap the corporate bond market to raise INR 1 billion by issuing two bonds with different maturities.

 

In the secondary market, deals worth INR 158.38 billion were recorded on the National Stock Exchange and BSE combined on Monday, down from INR 184.37 billion Friday. Among the actively traded papers, INR 13.84 billion in NABARD bonds and INR 5.05 billion in Small Industries Development Bank of India papers were traded. Papers issued by LIC Housing Finance, Indian Railway Finance Corp., Bajaj Housing Finance, and Hyderabad Metropolitan Development Authority were also actively traded. 

 

Traders expect corporate bond yields to be rangebound for the rest of the week. "Three-, five-year (bond yields) should be 7.50-55%," the PSU bank dealer said. "It depends on the geopolitical situation now," the dealer said. However, a dealer at another large public-sector bank said yields on bonds maturing in up to three years could fall by up to 10 bps if FIIs continue buying corporate bonds.  

 

Bond issuances by NBFCs are expected to rise in the coming days, dealers said. "They cannot be out of the market for long, they have to tap the market," the dealer at the state-owned bank said.

 

On bond issuances by public sector undertakings, dealers said it depends on their appetite and whether they want to raise funds domestically or externally. "For PSUs, RBI opened the door for ECBs (external commercial borrowings)," the dealer said. The RBI Friday announced a concessional foreign exchange swap facility for public sector undertakings till Sept. 30 to incentivise external commercial borrowings.

 

UDAY BONDS

In the secondary market, three Ujwal DISCOM Assurance Yojana bonds worth INR 3.50 million were traded Monday, according to data on the RBI's Negotiated Dealing System-Order Matching System.

* INR 2.0 million of Uttar Pradesh's 8.75%, 2030 bond was dealt at 7.4254%

* INR 1.0 million of Punjab's 8.47%, 2029 bond was dealt at 7.3757%

* INR 0.5 million of Uttar Pradesh's 8.77%, 2031 bond was dealt at 7.6122%

 

BENCHMARK LEVELS FOR CORPORATE BONDS: 

 

Tenure	Monday	Friday
Three-year	7.48-7.53%	7.70-7.75%
Five-year	7.52-7.55%	7.58-7.60%
10-year	7.70.7.73%	7.75%

 

End

 

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

 

With inputs from Vaishali Tyagi

Edited by Saji George Titus

 

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