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Informist, Thursday, Sept. 24, 2026

 

By Vaishali Tyagi

 

NEW DELHI – Yields on corporate bonds ended significantly higher across tenures Thursday due to selling by mutual funds and banks after Brent crude oil prices rose above $105-per-barrel mark on media reports that Iran may extend the war with the US, dealers said. The rise in government bond yields also pushed yields of corporate bonds higher, they said. The benchmark bond yield rose to 7.1067% Thursday from 7.0447% at the end of the previous session.

 

Market sentiment weakened after Iran's FARS News reported that Iran could extend the war to the Indian Ocean if attacked again by the US or Israel. "Yields are expected to rise further if news about an extension of the war continues to push crude prices higher and global environment remains uncertain," a dealer at a brokerage firm said. "So traders will look to book profits whenever they get an opportunity. This is typical in a volatile environment like the current one amid the West Asia war," a dealer said.

 

The yield on three-year bonds issued by the National Bank for Agriculture and Rural Development was 7.82-7.85% Thursday, against 7.74-7.75% Wednesday, while the indicative yield on NABARD's five-year bonds rose to 7.85-7.87% from 7.75-7.80% Wednesday. Yields on 10-year NABARD bond was at 7.88% Thursday. 

 

At 1646 IST, Brent crude oil for November delivery was at $104.73 per barrel after hitting the day's high of $106.50 a barrel, up from $97.91 per barrel Wednesday. The surge in oil prices pushed elevated US yields even higher, with the 10-year benchmark US Treasury yield touching an intraday peak of 5.15%, its highest level since 2007. Traders are closely tracking crude oil and US yields, as a further rise could push Indian government bond yields higher, which, in turn, would lift corporate bond yields, dealers said. 

 

The spike in global yields is also weighing on long-term domestic bonds, dealers said. "Longer-tenure (domestic corporate) bond yields are getting impacted due to global yields...people are not taking big bets on long-duration bonds, rather people are seen selling, no one wants to hold low yielding papers when rates are going to be higher," the dealer quoted above said.

 

In the secondary market, deals worth INR 142.76 billion were recorded on the National Stock Exchange and BSE combined, up from INR 102.42 billion on Wednesday. Papers issued by Capri Global Capital, Bajaj Finance, Bajaj Finance, Poonawalla Fincorp, Andhra Pradesh State Beverages Corp., Hinduja Leyland Finance, NIIF Infrastructure Finance, and Tata Capital were actively traded. 

Mutual funds made their presence felt at the short end of the curve by buying in low quantum and selling in higher quantum, while banks traded on both sides in the three- to five-year segment, and insurance companies sold bonds in the longer tenure, dealers said. 

 

Banks are deploying their funds in corporate bonds more as a temporary parking strategy, dealers said. "They have three- to five-year money (inflows from Foreign Currency Non-resident (bank) Deposits), which they eventually want to move into expanding their loan book...but for now, since they do not have full visibility on deploying it all at once, they have parked some funds in corporate bonds and g-secs (government securities)," a fund manager at a mutual fund house said.  "Mutual funds have been there in the short-term, buying and selling. And we have seen many mutual funds positioning themselves below two-year maturity segment," he said.               

 

On the primary market front, supply has increased sharply and participants are selling bonds, which is pushing secondary market yields higher as they look to lock in higher-yielding papers, dealers said. On Thursday, multiple issuers tapped the corporate bond market, with bonds worth INR 90 billion hitting it. Major issuances included by Tata Capital, which raised INR 17.25 billion through three-year bonds while Godrej Finance raised INR 2 billion through bonds maturing in April 2036. Other issuers included Utkarsh Small Finance Bank, Muthoot Fincorp, and Equitas Small Finance Bank.

Supply is expected to rise further on Friday and next week as issuers look to lock in funds at cheaper rates ahead of a potential rate hike in the Reserve Bank of India's Monetary Policy Committee meeting in October, dealers said. "Issuers are expecting rates will go up post policy and are locking in funds at much lower rates," the fund manager said. "Nobody would want to lose the opportunity on time and cost. If issuers lock in funds now, till whatever time is left before the potential rate hike, people will come and tap the market. That is why we are seeing a rise in supply from PSUs (public sector undertakings), NBFCs (non-banking financial companies) and other companies."

 

Friday, Small Industries and Development Bank of India plans to raise up to INR 60 billion through bonds maturing on Dec. 10, 2029. Market participants had expected SIDBI's coupon to come in the range of 7.75-7.80% when yields were slightly lower, and now with yields rising further and uncertainty on the global front, it may come in even higher, dealers said. On the upcoming supply side, India Infradebt Ltd. plans to raise INR 32 billion through three bonds, while Interise Trust plans to raise up to INR 17.37 billion through three bonds, including a floating rate bond. Other major issuers included Adani Airport Holdings, JSW Energy, and Akara Capital Advisors. 

 

On the monetary policy front, dealers expect a rate hike in October along with possible liquidity measures. "We are looking forward to the policy. First, regarding liquidity, so we expect they (RBI) will come up with more measures to absorb this excess liquidity," the dealer at broking firm said. "I think the most important will be the language or the guidance that RBI gives for future projections." Dealers said the liquidity measure along with a hike will lead to some adjustment in money market rates. And without liquidity withdrawal, only a hike will not be a prudent exercise.  

 

UDAY BONDS

In the secondary market, one Ujwal DISCOM Assurance Yojana bonds worth INR 6.00 million was traded Thursday, according to data on the Reserve Bank of India's Negotiated Dealing System–Order Matching System.

 

* INR 6.00 of Uttar Pradesh's 8.59%, 2030 bond was dealt at 7.1503%

 

BENCHMARK LEVELS FOR CORPORATE BONDS:

 

Tenure	Thursday	Wednesday
Three-year	7.82-7.85	7.74-7.75%
Five-year	7.85-7.87%	7.75-7.80%
10-year	7.88%	N.A

 

End

 

US$1 = INR 95.9550

 

Edited by Deepshikha Bhardwaj

 

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