Informist, Tuesday, Jan 31, 2023
By Asmita Patil
MUMBAI – Yields on corporate bonds ended mixed in the secondary market today, with those on three-year papers rising slightly due to selling by mutual funds ahead of Union Budget on Wednesday and the US Federal Open Market Committee’s policy review meet later today, dealers said.
Yields on 10-year bonds fell due to buying by insurance companies and tracking momentum in government securities, a dealer with a mid-sized brokerage firm said. Yields on five year bonds remained flat.
Yield on the benchmark 10-year government bond ended at 7.3438% as against 7.4004% on Monday. The yield ended at its lowest since Jan 19 as traders covered their short bets ahead of the Union Budget presentation, dealers said.
“In three-year (corporate bonds) segment, big mutual funds are selling to adjust their portfolios before the Budget and FOMC,” a debt-dealer with a mid-sized mutual fund house said. “If everything goes as expected yields will inch-up in short term segment post Budget, but in long term papers there is some supply side pressure so that segment has rallied a bit.”
The Budget is likely to estimate the government’s fiscal deficit in 2023-24 (Apr-Mar) at 5.9% of GDP, compared to 6.4% in the current fiscal year, according to a poll of 26 economists and market participants by Informist.
Further, according to the CME FedWatch tool, 99.9% of futures traders expect the US rate-setting panel to raise the federal funds target range by 25 basis points.
“Appetite for long term papers is very strong because of inflated books of insurance companies and pension funds, but comparatively the supply is low,” a dealer with a small insurance company said.
Traction in the market lifted trade volume. Deals worth 55.62 bln rupees were recorded on National Stock Exchange as against 38.19 bln rupees on Monday. BSE clocked deals worth 27.43 bln rupees as against 32.32 bln rupees on Monday.
Bonds issued by National Bank for Agriculture and Rural Development, HDFC Bank, Indian Railway Finance Corp, Housing Development Finance Corp, Indian Renewable Energy Development Agency, Andhra Pradesh State Beverages Corp, REC, IIFL Finance were traded the most across tenures.
In the primary market, REC raised 31.49 bln rupees through bonds maturing on Feb 28, 2026, at a coupon of 7.60%.
On Wednesday, Aditya Birla Finance plans to raise up to 14.98 bln rupees through bonds maturing in February 2026 and JM Financial Asset Reconstruction Co plans to raise up to 4 bln rupees through bonds maturing in three years.
Apart from these big ticket issuances, SK Finance plans to raise 500 mln rupees through bonds maturing in two years and IIFL Samasta Finance plans to raise up to 500 mln rupees through bonds maturing in six year-one month and 29 days.
Post Budget, several non-banking financial companies, banks, and corporates will hit the market to raise funds, merchant bankers said.
UDAY BONDS
In the secondary market, Haryana’s Ujwal DISCOM Assurance Yojana bonds maturing in March 2026, worth 61.60 mln rupees, were traded at a weighted average yield of 7.60%, data from the RBI’s Negotiated Dealing System–Order Matching System showed.
BENCHMARK LEVELS FOR CORPORATE BONDS:
End
Edited by Aditya Sakorkar
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