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Informist, Tuesday, Jul. 14, 2026

 

By Vaishali Tyagi

 

NEW DELHI – Corporate bond yields rose across tenures as fresh uncertainty over the West Asia conflict sparked panic selling and dampened risk appetite, dealers said. Rising crude oil prices and a sell-off in government bonds also weighed on the corporate bond market, prompting dealers to trim positions. "It is like just the risk appetite has been dented because of this fresh escalation that we have seen in West Asia," a fund manager at a mutual fund house said. 

 

Crude oil prices shot up after the US launched another round of attacks on Iran and reinstated the blockade on Iranian ports and the Strait of Hormuz, dealers said. The yields on the 10-year benchmark government bond ended at 6.7945%, up from Monday's 6.7309%

 

Dealers said corporate bonds with up to 1-year tenure appear lucrative given current geopolitical conditions and tight liquidity. The spread between g-secs (government securities) and corporate bonds in this segment is very attractive. Net liquidity absorbed by the RBI, a proxy for liquidity surplus, was INR 1.39 trillion Monday, up from INR 1.15 trillion Sunday, according to the latest data.

 

Some dealers said the inflows from foreign-currency non-resident (bank) deposits are weaker than expected earlier. However, dealers expect systemic liquidity to improve in the near term due to FCNR(B) inflows. According to Nomura, FCNR(B) flows in the first month seem encouraging, even as market confidence in the extent of inflows has declined of late. Nomura expects the scheme to lead to inflows of around $55 billion in FY27.

 

Dealers said volumes remained largely restricted to the up-to-two-year segment amid uncertainty and weak investor appetite. Beyond these segments, trading was selective, with selling seen from banks and mutual funds. Insurance companies and pension funds were largely absent from the market, they added. "Volumes are pretty low in corporate bond, and if it has risen from yesterday, it is not like that bonds are widely traded, and the bid-ask spreads are also quite wide," the fund manager said. 

 

The yield on three-year bonds issued by the National Bank for Agriculture and Rural Development rose to 7.40-7.45% from 7.33-7.35% compared with Monday, while the indicative yield on NABARD's five-year bonds was at 7.42-7.47% comapred with Monday's 7.30-7.33%. The yields on 10-yr NABARD bonds were at 7.43-7.45%.

 

In the secondary market, overall deals worth INR 113.56 billion were recorded on the National Stock Exchange and BSE combined Monday, marginally up from INR 105.24 billion Monday. Papers issued by the Hyderabad Metropolitan Development Authority, the Kerala Infrastructure Investment Fund Board, the Andhra Pradesh State Beverages Corp., the National Bank for Agriculture and Rural Development, and Indostar Capital Finance were actively traded.

 

Bonds worth INR 22 billion were issued Tuesday, similar to Monday's INR 22.25 billion. Muthoot Finance raised INR 5 billion through bonds maturing on Oct. 4, 2029, against the planned INR 15 billion, dealers said. Nuvama Wealth Finance raised INR 3.50 billion through bonds maturing on Jan. 15, 2029. 

 

On Wednesday, non-banking financial companies, along with a state-owned entity, plan to raise up to INR 46.50 billion. REC is set to raise up to INR 30 billion via bonds maturing on July 1, 2031. Dealers expect the coupon on REC's 2031 bonds to come in around 7.15%. "But the market is jittery with yields having risen across tenures, so it's hard to say," a dealer at a brokerage firm said. "If insurers and pension funds participate, it could come near 7.15%. Otherwise, we'll have to wait and watch." Other issuers include Poonawalla Fincorp, which plans to raise INR 5 billion through September 2029 bonds, while ICICI Home Finance Co. has invited bids to raise up to INR 7 billion through floating rate bonds. 

 

The trajectory of corporate bond yields will depend on geopolitical developments, crude oil prices, and domestic factors, a dealer at a brokerage firm said. "In a very near-term and immediate basis, if crude touches 100 ($100 per barrel) again, we will retrace back to higher corporate bond levels (seen at the start of June)... and, we would not be surprised if the 10-year g-sec (government security) reaches 7%, which will push corporate bond yields even higher," the dealer said. 

 

At 1801 IST, Brent crude oil futures for September delivery were at $86.66 a barrel, up from $83.30 Monday. Crude oil prices have risen nearly 13% from Monday's low of $77.28 per barrel.

 

Dealers said any impact from the potential inclusion of Indian sovereign bonds in Bloomberg's Global Aggregate Index on corporate bonds would be little to none, as it has already been priced in. Some government bond traders expect an announcement on the inclusion this week, while others have pushed back the likely timeline to August or September.

 

UDAY BONDS

In the secondary market, six Ujwal DISCOM Assurance Yojana bonds worth INR 69.50 million were traded on Tuesday, according to data on the RBI's Negotiated Dealing System-Order Matching System.

 

* INR 25.00 million of Uttar Pradesh's 8.58%, 2031 bond was dealt at 7.1100%

* INR 19.00 million of Punjab's 8.61%, 2030 bond was dealt at 7.0758%

* INR 12.00 million of Uttar Pradesh's 8.77%, 2031 bond was dealt at 7.1217%

* INR 6.00 million of Uttar Pradesh's 8.49%, 2028 bond was dealt at 6.5912%

* INR 5.00 million of Uttar Pradesh's 8.35%, 2029 bond was dealt at 6.7247%

* INR 2.50 million of Punjab's 8.47%, 2029 bond was dealt at 7.0997%

 

BENCHMARK LEVELS FOR CORPORATE BONDS:

Tenure	Tuesday	Monday
Three-year	7.40-7.45%	7.33-7.35%
Five-year	7.42-7.47%	7.30–7.33%
10-year	7.43-7.45%	--

 

End

 

US$1 = INR 96.20

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

 

Edited by Saji George Titus

 

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