Informist, Friday, Sep 22, 2023

By Subhana Shaikh

MUMBAI – The day that the Indian fixed income market awaited for years is finally here. Marking the culmination of almost a decade's anticipations, the Indian government bonds will finally be included in JPMorgan's Global Bond Index – Emerging Markets' suite from Jun 28, 2024. However, the corporate bond market didn't budge, keeping yield movement flat, dealers said.

Government bonds will hold the maximum 10% weightage on the GBI-EM Global Diversified Index, and 8.7% weight on the flagship index for global emerging market debt. The process will be completed by Mar 31, 2025, with a 1% increase in weightage each month.

The buzz in the market is that the inclusion will bring inflows of $30 bln-$40 bln to India.

"So far, banks, insurance companies and mutual funds have been the largest buyers of government debt. An additional source of funds will help cap bond yields and the government's borrowing costs", Tata Mutual Fund said in a note.

"This could lead to reduction in cost of capital and in turn also benefit other asset classes," the mutual fund house said.

While market participants believe this is a positive move, reaction to the same in the corporate bond market was minimal today because investors had already factored in this development.

"Sentiment is quite positive on this news of index inclusion, but market activity in corporate bonds was dead today as investors had already factored in this news," a dealer at a mid-sized brokerage firm said.

Only mutual funds and a handful of banks were said to have been active in the secondary market. According to dealers, mutual funds continued to add fresh positions and durations to their portfolios.

Papers issued by REC, Bank of Baroda, HDFC Bank, Andhra Pradesh State Beverages Corp, LIC Housing Finance, Power Finance Corp, Indiabulls Housing Finance, National Bank for Agriculture and Rural Development, Navi Finserv, Uttar Pradesh Power Corp, and Shriram Transport Finance Co were traded the most across tenures today.

In the primary market today, State Bank of India issued its second tranche of infrastructure bonds, raising 100 bln rupees through 15-year bonds at a coupon of 7.49%, better than what market participants had expected.

Other lenders, which were waiting for SBI's cut off, will now start tapping the bond market next week, according to merchant bankers. These mainly include Punjab National Bank, Canara Bank and ICICI Bank.

Market participants are also waiting for fresh primary market supply from big-ticket issuers next week. On Monday, REC has invited bids for its perpetual bonds. The state-owned company plans to raise up to 20 bln rupees through this issue.

Today, deals aggregating 55.17 bln rupees were recorded on the National Stock Exchange and BSE combined, as against 51.84 bln rupees on Thursday.

UDAY BONDS

In the secondary market, Ujwal DISCOM Assurance Yojana bonds worth 519.50 mln rupees were traded at a weighted average yield of 7.4400-7.5899%, according to data from the Reserve Bank of India's Negotiated Dealing System-Order Matching System.

* 435 mln rupees of Rajasthan's 2025-2026 bonds were traded at 7.4400-7.5302%

* 59 mln rupees of Telangana's 2025-2031 bonds were traded at 7.4657-7.5899%

* 25.5 mln rupees of Haryana's 2024-2026 bonds were traded at 7.4870-7.5319%

BENCHMARK LEVELS FOR CORPORATE BONDS:

End

Edited by Deepshikha Bhardwaj

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