Informist, Wednesday, Nov 29, 2023
By Sachi Pandey
MUMBAI – Despite a pick-up in trade volume in the secondary market, yields on corporate bonds remained flat across tenures today due to lack of firm domestic cues, dealers said.
“It is the month-end period, and then the event (monetary policy meeting) is there…it’s always seen that before the event, the market is quiet,” said the head of debt capital market at a brokerage firm.
Merchant banks were on the selling side and some insurance companies bought papers today, dealers said. Mutual funds were said to have been active on both sides.
Improved participation led to a surge in trade volumes, with deals aggregating 144.77 bln rupees being recorded on the National Stock Exchange and BSE combined as of 1500 IST, against 50.81 bln rupees on Tuesday.
Bonds issued by Andhra Pradesh Capital Region Development Authority, REC, HDFC Bank, Indiabulls Housing Finance, HDB Financial Services, Power Finance Corporation, National Bank for Agriculture and Rural Development, Andhra Pradesh State Beverages Corp, and Uttar Pradesh Power Corp were traded the most.
Yields on corporate bonds did not budge even after a fall of 12 basis points in the yield on the benchmark 10-year US Treasury note today. The yield fell to 4.29% from 4.41% at the close of the Indian market on Tuesday after US Federal Reserve Governor Christopher Waller indicated that the first cut in policy rate could be on the horizon if inflation remains lower for a few months.
“Only G-sec (government securities) moved because of the US treasury…everyone is now looking forward to RBI policy,” said the debt capital market head quoted earlier.
The yield on the 10-year benchmark government bond ended at 7.25% today, against 7.28% on Tuesday, tracking the drop in yields on US Treasury notes.
Market participants are now waiting for the RBI’s Monetary Policy Committee meeting, scheduled for Dec 6-8, to gauge the domestic policy rate trajectory.
Investors expressed concern about constrained liquidity in the banking system, which has led to a rise in yields on short-term bonds in the past few days. Liquidity in the banking system has been in deficit for most of 2023-24 (Apr-Mar).
“Whatever supply is there is also getting sold at par or below par (in the secondary market) due to tight liquidity,” said a dealer at a mid-sized brokerage firm.
At the end of trade on Tuesday, liquidity in the banking system was in a deficit of 1.10 trln rupees, little changed from Monday, according to RBI data.
Bank of Baroda has invited bids on Thursday to raise up to 50 bln rupees through infrastructure bonds maturing in 10 years. The cut-off for the bond is expected to be in the range of 7.60-7.70%, dealers said.
Several companies and non-banking financial institutions are in talks with arrangers to tap the bond market in the coming days, merchant bankers said.
UDAY BONDS
In the secondary market, none of the Ujwal DISCOM Assurance Yojana bonds were traded today, according to data from the RBI’s Negotiated Dealing System-Order Matching System.
BENCHMARK LEVELS FOR CORPORATE BONDS:
End
Edited by Avishek Dutta
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