Informist, Monday, Dec 11, 2023

By Sachi Pandey

MUMBAI – Yields on corporate bonds ended steady in the secondary market today ahead of the release of domestic and US CPI data for November, which is scheduled for release on Tuesday, dealers said. 

According to a poll of 20 economists polled by Informist, India's retail inflation based on CPI is expected to rise to a three-month high of 5.8% in November from 4.87% in October because of a rise in vegetable prices. 

The Reserve Bank of India's monetary policy committee on Friday retained its inflation forecast for the current financial year ending March at 5.4%, and for Oct-Dec at 5.6%, despite risks to food inflation in the near-term. For Jul-Sep of 2024-25, CPI inflation is seen at 4.0%, which is the RBI's medium-term target.

However, the RBI governor Shaktikanta Das reiterated on Friday that reaching the 4.0% target should not be a one-off event, but that the Monetary Policy Committee should have confidence that the aim would be reached on a durable and consistent basis. 

Meanwhile, economists polled by Reuters expect the headline inflation data in the US to remain flat month-on-month at 3%. However, core inflation is seen rising to 0.3% on month in November, from a 0.2% rise in October. 

The inflation data is expected to have little impact on the Federal Reserve monetary policy decision due on Wednesday. "Considering the payroll numbers (in the US), then their (US Fed officials) last many statements with respect to no more hikes are eyed, and people are expecting that there could be no more hike for probably six months now", said a fixed income senior vice president at a big sized mutual fund house. 

According to CME's FedWatch Tool, over 98% of traders expect the US Fed to stay pat on the key target rate of 5.25-5.50%, with 50% expecting a 25 basis point rate cut in May.  

In the secondary market of corporate bonds, few banks were selling, while mutual funds were active on both sides today, dealers said. Subdued activity was reflected in trade volumes, with deals worth 59.58 bln rupees being recorded on the National Stock Exchange and BSE combined, as against 76.46 bln rupees on Friday.  

Trading activity was restricted to the shorter end of the curve, dealers said. Papers issued by Larsen and Toubro, Cholamandalam Investment and Fin, National Bank for Agriculture and Rural Development, Punjab National Bank, Bharti Telecom, Small Industries Development Bank of India, Kotak Mahindra Prime, and REC across tenures exchanged hands on the bourses today.

In the primary market today, Axis Finance raised 2.5 bln rupees by reissuing bonds maturing in Oct 2033 at a yield of 8.40%. 

On Tuesday, Bank of Maharashtra plans to raise up to 10 bln rupees through Basel-III compliant tier-II bonds maturing in 10 years. The bonds carry a call option five years from the date of allotment or any anniversary date thereafter. 

Tata Capital Housing Finance also plans to tap the primary market to raise up to 10 bln rupees through bonds maturing in five years.

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

UDAY BONDS

In the secondary market, none of the Ujwal DISCOM Assurance Yojana bonds were traded, according to data from the RBI's Negotiated Dealing System-Order Matching System.

BENCHMARK LEVELS FOR CORPORATE BONDS:

End

Edited by Vidhi Verma

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