India Corporate Bonds
Short-term yields down tracking gilts, FCNR flows help
This story was originally published at 19:50 IST on 3 September 2026
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By Nandini Sinha
MUMBAI – Yields on short-term corporate bonds ended sharply lower Thursday, tracking Indian government bond yields and robust foreign currency flows through the Reserve Bank of India's special swap schemes, dealers said. Mutual funds remained the most active participants in the secondary market, with short-term papers maturing in up to four years actively traded.
The yield fall also supported Power Finance Corp. Ltd.'s bond auction. PFC Thursday raised INR 42.44 billion through two bonds maturing in five years and 10 years. PFC raised INR 19.75 billion through the five-year bond at 7.60% and 22.69 billion through the 10-year bond at a coupon of 7.61%. The state-owned power sector financier had planned to raise up to INR 50 billion through the two bonds of INR 25 billion each.
The yield on three-year bonds issued by National Bank for Agriculture and Rural Development fell to 7.62% from 7.70–7.72% Wednesday, while the indicative yield on NABARD's five-year bonds declined to 7.70% from 7.73–7.75%. The yield on the 10-year benchmark Indian government bond settled at 6.96% Thursday, down from 6.98% Wednesday.
"There was a major improvement in yields today (Thursday)," a dealer at a brokerage said. "G-sec (government securities) got better, liquidity also rose, along with FCNR(B) (foreign currency non-resident bank) inflows," the dealer said.
"Levels got better even in CDs (certificates of deposit) due to FCNR," a dealer at a public sector bank said. "However, the levels (yields on corporate bonds) didn't improve (fall) that much for NBFCs (non-banking financial companies), because they had not risen that much in the first place."
The RBI's foreign exchange swap window attracted total foreign exchange inflows of $136.38 billion as of Monday, including $127.23 billion under FCNR(B). The net liquidity absorbed by the RBI, a proxy for the liquidity surplus, rose to INR 9.70 trillion Wednesday from 7.76 trillion Tuesday.
In the secondary market, deals worth INR 123.37 billion were recorded on the National Stock Exchange and BSE combined Thursday, down from INR 138.16 billion Wednesday. Papers issued by Small Industries Development Bank of India, Power Finance Corp., NABARD, Tata Capital, Shriram Finance, and Tata Power Renewable Energy were traded actively Thursday.
On Friday, AlphaGrep Securities will tap the primary market to raise up to INR 2 billion by issuing bonds maturing on Sept. 12, 2027, dealers said. The issue has a base size of INR 1 billion and a green-shoe option of INR 1 billion. The issue carries a fixed coupon of 10.50%, payable quarterly.
UDAY BONDS
In the secondary market, two Ujwal DISCOM Assurance Yojana bonds worth INR 10.89 million were traded Thursday, according to data on the RBI's Negotiated Dealing System-Order Matching System.
* INR 5.89 million of Madhya Pradesh's 8.05%, 2029 bond was dealt at 7.1245%
* INR 5.00 million of Tamil Nadu's 8.05%, 2031 bond was dealt at 7.3138%
BENCHMARK LEVELS FOR CORPORATE BONDS:
|
Tenure |
Thursday | Wednesday |
|
Three-year |
7.62% | 7.70–7.72% |
|
Five-year |
7.70% | 7.73–7.75% |
|
10-year |
-- | -- |
End
US$1 = INR 94.4850
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Saji George Titus
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