Informist, Tuesday, Feb 6, 2024

By Abhinaba Saha 

MUMBAI – Yields on corporate bonds ended largely steady across tenures today as investors, mainly mutual funds, engaged in churning their portfolios ahead of Thursday's outcome of the Reserve Bank of India's Monetary Policy Committee meeting, dealers said.

Trade volume remained strong today due to improved participation by all players in the market. Deals aggregating 112.5 bln rupees were recorded on the National Stock Exchange and BSE combined, against 90.14 bln rupees on Monday. Mutual funds, banks, and insurance companies were all active across tenures in the secondary market, dealers said.

"Everybody was rebalancing their portfolio ahead of the policy. That is why there was better participation today," said the fixed income head at a large mutual fund house. 

Papers issued by National Bank for Agriculture and Rural Development, REC, Housing And Urban Development Corp, HDFC Bank, ICICI Home Finance Co, LIC Housing Finance, Power Finance Corp, Satin Creditcare Network, Indostar Capital Finance, and Uttar Pradessh Power Corp were traded the most today. 

According to 27 respondents in a poll by Informist, the MPC is expected to keep the repo rate unchanged at 6.50%. Most market participants expect the committee to keep the policy repo rate unchanged for some more meetings, with inflation still above the central bank's medium-term target of 4%. 

The focus will be on whether the members of the rate-setting panel think it is time to change the policy stance of 'withdrawal of accommodation'. Market participants exercised caution in the secondary market of corporate bonds today, as they remained watchful of the RBI's stance on banking system liquidity.
 

"The way he (RBI Governor Shaktikanta Das) has been doing these VRRRs (variable rate reverse repos), I am afraid, what if he surprises us negatively in the next meeting," a debt dealer at a large mutual fund house said. "People were expecting a change in stance. But after the recent deficit numbers, I doubt he will do that." 

The RBI has announced a series of variable rate reverse repo auctions lately to keep banking system liquidity from narrowing too much. Today, the central bank announced it would conduct another variable rate reverse repo auction of 500 bln rupees on Wednesday.

On Monday, the liquidity deficit in the banking system was at 1.22 trln rupees, against 1.10 trln rupees on Sunday, according to data from the RBI. The deficit widened due to outflows owing to payments for Friday's gilts auction, amounting to 390 bln rupees, dealers said.

Meanwhile, in the primary market, issuers await clarity on the outcome of the RBI's policy review this week. Merchant bankers say issuances will pick up as banks, companies, non-banking financial companies, and municipal corporations start lining up issuances to complete their borrowing targets.

Bajaj Finance has invited bids on Wednesday for its long-term bond issue. The non-bank lender plans to raise up to 24 bln rupees through this issue.

UDAY BONDS

In the secondary market, Ujwal DISCOM Assurance Yojana bonds worth 51 mln rupees were traded at a weighted average yield of 7.5492-8.1077%, according to data from the Reserve Bank of India's Negotiated Dealing System-Order Matching Segment.

* 45.00 mln rupees of Rajasthan's 2024-2025 bonds were traded at 7.5492-8.1077% 
* 6.00 mln rupees of Uttar Pradesh's 2027-2030 bonds were traded at 7.6636-7.6967%

BENCHMARK LEVELS FOR CORPORATE BONDS:

Edited by Avishek Dutta

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