India Corporate Bonds: Yields steady on lack of cues, NABARD scrapped

Informist, Thursday, Jun 1, 2023

By Parth Singh

NEW DELHI – Yields on corporate bonds ended steady across tenures in the secondary market today as investors engaged only in requirement-based trading due to lack of significant triggers, dealers said.

While banks were on the selling side, mutual funds were both buying and selling, dealers said. 

“Typically market waits for cues before a week from MPC, so yields are expected to remain range-bound for a while,” a debt dealer said.

Market participants expect yields on corporate bonds to fall further after the Reserve Bank of India’s Monetary Policy Committee meeting on Jun 6-8. Investors are of the view that the central bank will stick to its decision to not hike the repo rate any further this year.

“Market sentiment seemingly continues to be positive, and will remain like that as we head towards policy. We expect good demand from investors because of the surplus liquidity in the banking system,” a debt fund manager said. 

Liquidity in the banking system is currently estimated to be in a surplus of 1.76 trln rupees, up from 1.35 trln rupees on Wednesday. The surplus widened due to month-end spending by the government in the form of salaries and pension payouts.

Bonds issued by Housing Development Finance Corp, REC, Indian Railway Finance Corp, Power Finance Corp, Punjab National Bank, National Bank for Agriculture and Rural Development, Bajaj Housing Finance and National Housing Bank were traded the most across tenures.

In the primary market, National Bank for Agriculture and Rural Development withdrew its plan to raise up to 50 bln rupees through bonds maturing on Nov 2, 2026, due to high bid rates.

“NABARD was being considered as the last major issue before RBI’s policy. So, primary supply will likely go into a cool-down period for a week,” another debt dealer at a private brokerage firm said.

On Friday, Muthoot Microfin plans to raise up to 1.5 bln rupees through bonds maturing in three years. According to merchant bankers, some private companies may follow suit next week.

On the trade volume side, deals aggregating 143 bln rupees were recorded on the National Stock Exchange and BSE combined today as against 99 bln rupees on Wednesday.

UDAY BONDS

In the secondary market, Tamil Nadu’s 2027-30 Ujwal DISCOM Assurance Yojana bonds worth 9 mln rupees were traded at a weighted average yield of 7.6467-7.6679%, according to data from the RBI’s Negotiated Dealing System-Order Matching System.

BENCHMARK LEVELS FOR CORPORATE BONDS:

TENURES

TODAY

WEDNESDAY

Three-year

7.42-7.47%7.43-7.48%

Five-year

7.40-7.45%7.40-7.45%

10-year

7.39-7.44%7.38-7.42%

End

Edited by Vidhi Verma

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Source: Cogencis