Informist, Wednesday, Dec 6, 2023
By Sachi Pandey
MUMBAI – Yields on corporate bonds remained steady in the secondary market today amid lack of firm domestic cues and caution ahead of the Reserve Bank of India’s monetary policy meeting, dealers said. Some insurance companies were buying papers in the secondary market today, and mutual funds were active on both sides to churn their portfolio, dealers said.
Papers issued by National Bank for Agriculture and Rural Development, HDFC Bank, Indian Railway Finance Corp, State Bank of India, DME Development, Tata Capital Financial Services, Uttar Pradesh Power Corp, Small Industries Development Bank of India, Jana Holdings, and Kotak Mahindra Prime were traded the most on exchanges.
Today, deals worth 76.41 bln rupees were recorded on the National Stock Exchange and BSE combined, as against 21.25 bln rupees on Tuesday.
Market participants refrained from placing large bets ahead of the RBI’s monetary policy meeting outcome, scheduled to be announced on Friday, dealers said. Respondents of the poll conducted by Informist unanimously predict that the Monetary Policy Committee will stick to its ‘withdrawal of accommodation’ stance and key interest rate of 6.50%, having raised the rate by 250 basis points from May 2022 to February.
“…nothing will happen in this policy…he (RBI governor) will definitely not say no OMO’s (open market operation sales), because that will lead to a rally, so either he will keep quiet or will say one line that– we are monitoring the liquidity situation very closely,” said a fund manager at an insurance company.
At the end of trade on Tuesday, liquidity in the banking system was in a surplus of 115.59 bln rupees, as against a surplus of 63.78 bln rupees on Monday, according to RBI data. However, dealers expect the liquidity in the banking system to return to a deficit by the end of the week as outflows owing to tax deducted at source and excise duty payment have started in tranches.
A fall in yields on global bonds and expected inflows on account of the inclusion of government securities in JPMorgan’s Global Bond Index – Emerging Markets is expected to provide cushion to yields on corporate bonds in Jan-Mar, market participants said.
Indian government bonds will be included in JPMorgan’s index over a 10-month period starting Jun 28. The move is expected to attract foreign currency inflows of around $20-$24 bln in government securities, which could result in fall in yields on these securities. Yields on corporate bonds are expected to mimic moves in yields on government bonds, with the latter being the underlying benchmark for corporate bonds.
“I see yields much lower than where it is. 7.00-7.10% (for 10-year benchmark government bond) should be the range where we should be ending March,” said a treasury head at a big public sector bank.
Yields on the 10-year benchmark government bond ended at 7.25% today from 7.26% on Tuesday.
In the primary market of corporate bond, Tata Capital Financial Services raised 25 bln rupees through bonds maturing in 10 years at a coupon of 8.11%, which was fully subscribed. India Infrastructure Finance Co also raised 10 bln rupees through 15-year bonds at a coupon of 7.67%. The issue was fully subscribed.
On Thursday, Canara Bank will tap the primary market to raise up to 35 bln rupees through basel-III compliant additional tier-I bonds. According to market participants, the issuer expects the cut-off on these bonds to be around 8.30%.
Apart from Canara Bank’s hefty issuance, Shriram Finance also plans to raise up to 2 bln rupees by reissuing Mar 21, 2025 bonds.
UDAY BONDS
In the secondary market, none of the Ujwal DISCOM Assurance Yojana bonds were traded at a weighted average today, according to data from the Reserve Bank of India’s Negotiated Dealing System-Order Matching System.
BENCHMARK LEVELS FOR CORPORATE BONDS:
End
US$1 = 83.33 rupees
With inputs from Asmita Patil
Edited by Manisha Baxla
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