Informist, Thursday, Oct 12, 2023

By Sachi Pandey

MUMBAI – Sluggish activity ahead of the release of domestic and US CPI inflation data for September kept yields on corporate bonds steady in the secondary market today, dealers said. Both the sets of data are scheduled to be released post market hours. 

"5.4 is the consensus expectation on (India's) CPI, so it looks like there won't be any negative surprises over there", said a fund manager at a mid-sized asset management company.

According to a poll of 21 economists by Informist, CPI inflation in India is expected to fall to a three-month low of 5.4% in September because of a sharp decline in tomato prices and a favourable base effect. The estimates in the poll range from 5.2% to 6.2%.

Economists polled by Dow Jones expect an increase of 0.3% on month and 3.6% on year in the US CPI print for September. The data is expected to provide further cues on whether the Federal Reserve will raise interest rates.

According to the CME Fedwatch tool, most market participants currently feel the US Fed will stand pat on the target range of 5.25-5.50% in its monetary policy review meeting in November.

In the secondary market of corporate bonds, a few banks sold papers and insurance companies were on the buying side, dealers said. Mutual fund houses were active on both sides. 

Subdued activity was reflected in trade volumes today, with deals worth 44.75 bln rupees being recorded on the National Stock Exchange and BSE combined, as against 101.90 bln rupees on Wednesday.  

Papers issued by Andhra Pradesh State Beverages Corp, National Bank for Agriculture and Rural Development, Bank of Baroda, State Bank of India, Shriram Transport Finance Company, Tata Capital Financial Services, Navi Finserv, and Spandana Sphoorty Financial across tenures exchanged hands on bourses today.

"There is still some fear of OMO (open market operation) sales in the market as RBI (Reserve Bank of India) said it firmly," said a fixed income trader at a foreign bank. "There is hardly any liquidity in the market, and no reason for OMO currently, but still the market expects it this month itself because RBI said so." 

Liquidity has remained in deficit for most of this month. At the start of trade today, liquidity in the banking system was estimated to be in a deficit of 504.87 bln rupees, against 418.84 bln rupees on Wednesday. 

On Oct 6, the RBI's Monetary Policy Committee surprised money markets with the announcement of open market operation sales to control liquidity in the banking system.

In the coming days, several non-banking finance companies and housing finance companies plan to tap the primary market for corporate bonds, according to merchant bankers. 

UDAY BONDS

In the secondary market, Ujwal DISCOM Assurance Yojana bonds worth 94.6 mln rupees were traded at a weighted average yield of 7.6493-7.6870%, according to data from the Reserve Bank of India's Negotiated Dealing System-Order Matching System.

* 42.50 mln rupees of Tamil Nadu's 2029-32 bonds were traded at 7.6494-7.6515%

* 25.50 mln rupees of Telengana's 2028-30 bonds were traded at 7.6493-7.6507%

* 12 mln rupees of Uttar Pradesh's 2028 bonds were traded at 7.6495-7.6504%

* 9 mln rupees of Jharkhand's 2031 bonds were traded at 7.6508% 

* 5.60 mln rupees of Rajasthan's 2025 bonds were traded at 7.6870%

BENCHMARK LEVELS FOR CORPORATE BONDS:

Edited by Avishek Dutta

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