Informist, Wednesday, Jan 31, 2024
By Sachi Pandey and Subhana Shaikh
MUMBAI – Yields on corporate bonds declined by 2-3 basis points in the secondary market today on the back of buying by pension funds and insurance companies, dealers said. After remaining on the sidelines over the past week, investors took positions before India’s Interim Budget for 2024-25 (Apr-Mar) and the US Federal Open Market Committee meeting outcome on Thursday, dealers said.
While pension funds and insurance companies were seen buying corporate bonds in the secondary market, some mutual funds, traders, and a few banks were said by dealers to have been on the selling side.
Papers issued by REC, State Bank of India, National Bank For Agriculture And Rural Development, Mahanagar Telephone Nigam, ONGC Petro additions, Bajaj Finance, L&T Finance Holdings, Small Industries Development Bank of India, National Housing Bank, NTPC, and Mahindra & Mahindra Financial Services were traded across tenures today.
“The Budget should be a non-event because the gross borrowing numbers are expected to be close to 1,500 crore (15 trln) rupees,” a dealer at a small-sized brokerage said. “Also, since this is an Interim Budget, they can’t do much. Whatever provisioning will take place, it will be after the elections, in June. Corporate bonds may see some action post FOMC outcome, if G-secs (government securities) move; there won’t be a runaway rally though.”
According to a median of 23 analysts’ estimates in an Informist poll, the Centre is likely to announce gross borrowing of 15.20 trln rupees through dated securities for 2024-25, against its borrowing of 15.43 trln rupees in 2023-24. The net supply for 2024-25 is seen at 11.65 trln rupees, against 11.81 trln rupees in the current financial year.
A fall in US Treasury yields also supported this buying in corporate bonds, dealers said. The yield on the 10-year benchmark US Treasury note fell to 4.02% from 4.07% at the time the Indian markets closed on Tuesday as the US Treasury cut its estimated borrowing for Jan-Mar to $760 bln, lower than the estimate of $816 bln.
In the primary market, big-ticket issuer NABARD raised 70 bln rupees through its bonds maturing on Apr 30, 2029, at a coupon of 7.68%. The issue was fully subscribed.
“The bond was wiped out completely by the Employees’ Provident Fund Organisation, and levels are lower than what the market was expecting,” a fund manager at a mid-sized asset management company said.
On Thursday, GMR Airports invited bids for its Nov 25, 2026, bond and plans to raise 22.5 bln rupees at a coupon of 13.275%. SMFG India Credit, Hero Fincorp, and SATYA MicroCapital will also tap the primary market on Thursday to raise up to 3.25 bln rupees cumulatively.
UDAY BONDS
In the secondary market, Ujwal DISCOM Assurance Yojana bonds worth 25.20 mln rupees were traded at a weighted average yield of 7.4017-7.6230%, according to data from the RBI’s Negotiated Dealing System-Order Matching Segment.
* 25 mln rupees of Rajasthan’s 2024 bonds were traded at 7.4017%
* 0.20 mln rupees of Tamil Nadu’s 2032 bonds were traded at 7.6230%
BENCHMARK LEVELS FOR CORPORATE BONDS:
End
Edited by Rajeev Pai
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