Informist, Thursday, Aug 17, 2023
By Asmita Patil
MUMBAI – A higher-than-expected CPI print for the month of July coupled with an uptick in the US Treasury yields pushed yields on corporate bonds up by 5-7 basis points across tenures today, dealers said.
Data released by the National Statistical Office on Monday showed India’s annual inflation rate, based on the Consumer Price Index, rose to a 15-month high of 7.44% in July from 4.87% in June. According to the median of a poll of 26 economists by Informist, India’s CPI inflation was seen at 6.5% in July.
The rise in the headline print was mainly due to a surge in retail prices of vegetables, particularly tomato. In July, the inflation in tomato was 201.54%, the highest in at least eight years.
The rise in prices is not limited to vegetables. Prices of edible oils and cereals, amongst other things, are on a rise, which can easily translate into higher inflation over the next two prints, dealers said.
On the global front, the yield on the benchmark 10-year US Treasury note surged to 4.29%, the highest level since Oct 21, from 4.16% at the end of Indian market hours on Monday.
US Treasury yields rose as minutes of the US Federal Open Market Committee’s Jul 25-26 meeting showed that most policymakers continued to prioritise the battle against inflation even as others cited economic risks of pushing rates too far.
“After the inflation numbers and the US Fed minutes, which suggested that the Fed would like to raise rates further, the market is assessing a probability that the RBI could hike rates in its October policy or may continue with this incremental CRR for a longer period of time,” a chief investment officer with a mid-sized mutual fund house said.
The Reserve Bank of India announced an incremental cash reserve ratio of 10% on all scheduled banks during its policy announcement on Aug 10.
The additional CRR will be applicable on the increase in net demand and time liabilities of banks between May 19 and Jul 28, RBI Governor Shaktikanta Das had said. Das said the incremental CRR will be reviewed on Sep 8 or earlier with a view to returning the impounded funds to the system ahead of the festival season.
Public sector banks and pension fund houses were buying papers in the secondary market today, and private banks were selling, dealers said. Mutual fund houses were active on both the sides.
Bonds issued by REC, Andhra Pradesh State Beverages Corp, HDFC Bank, IDFC First Bank, Power Finance Corp, National Bank for Agriculture and Rural Development and Indiabulls Housing Finance were traded the most across tenures.
Today, deals aggregating 60.81 bln rupees were registered on the National Stock Exchange and BSE combined, against 38.55 bln rupees in the previous session.
In the primary market today, India Grid Trust raised 16.5 bln rupees at a coupon of 7.35% payable quarterly.
On Friday, Bajaj Finance plans to raise up to 18 bln rupees through re-issuance of its bonds maturing on May 23, 2033 and Tata Capital plans to raise up to 2.95 bln rupees through re-issuance of its bonds maturing on Aug 4, 2025.
In the secondary market, Ujwal DISCOM Assurance Yojana bonds worth 7.53 mln rupees were traded at a weighted average yield of 7.6470-8.0111%, according to data from the Reserve Bank of India’s Negotiated Dealing System–Order Matching System.
* 700,000 rupees of Rajasthan’s 2025–26 bonds were traded at 8.0098%
* 800,000 rupees of Jammu and Kashmir’s 2026 bonds were traded at 8.0111%
* 300,000 rupees of Telangana’s 2030 bonds were traded at 8.0104%
* 200,000 rupees of Haryana’s 2025 bonds were traded at 8.0055%
* 730,000 rupees of Punjab’s 2031 bonds were traded at 7.5093%
* 4.5 mln rupees of Uttar Pradesh’s 2025–29 bonds were traded at 7.6470-8.0096%
BENCHMARK LEVELS FOR CORPORATE BONDS:
Edited by Tanima Banerjee
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