India Corporate Bonds: Ylds up on MF selling; primary supply robust

Informist, Monday, Sep 25, 2023


By Subhana Shaikh

MUMBAI – Yields on corporate bonds rose 3-5 basis points in the secondary market today amid low trade volume on the back of selling by mutual funds, owing to redemption pressures, dealers said.


In the secondary market of corporate bonds, mainly mutual funds were said to have been selling bonds, while banks were buying them. According to dealers, mutual funds were seen selling corporate bonds owing to rising redemption pressure at the end of the September quarter.


While the inclusion of Indian government's bonds in JP Morgan's Global Bond Index has lifted investor sentiment, concerns around rising US Treasury yields and crude oil prices continued to persist, market participants said.  


Papers issued by HDFC Bank, State Bank of India, Andhra Pradesh State Beverages Corp, Power Finance Corp, Indiabulls Housing Finance, National Bank for Agriculture and Rural Development, Navi Finserv, Uttar Pradesh Power Corp, Shriram Transport Finance Co, and Kerala Financial Corp were traded the most today.


Overall, market participation remained subdued, leading to tepid trade volumes. Today deals aggregating up to 60.34 bln rupees were recorded on the National Stock Exchange and BSE combined as against 55.17 bln rupees registered on Friday. This is because investors braced themselves ahead of a huge fresh primary supply worth over 130 bln rupees lined up for sale on Tuesday.


India's corporate bond market is set to witness its first-ever social sector bond offering, with big-ticket issuer National Bank for Agriculture and Rural Development planning to raise up to 30 bln rupees through these bonds maturing in five years.


According to merchant bankers, NABARD's maiden social sector bonds are likely to receive robust demand, with coupon expectations lower than its benchmark five-year paper. Social sector bonds are debt instruments used to fund new and existing projects with positive social outcomes.


On Sep 5, Informist had exclusively reported that NABARD is set to tap the primary market with the first ever social sector bond issuance this month. On Sep 15, NABARD Chairman Shaji K.V. told Informist that the bonds will be launched on Sep 29. 


While Punjab National Bank plans to raise up to 30 bln rupees through additional tier-I bonds, Canara Bank has invited bids for its 10-year infrastructure bonds and aims to raise up to 50 bln rupees through this issue.


Among non-banking financial services, Kotak Mahindra Investments, L&T Finance, and Macrotech Developers, among others, have also called bids for their respective offerings. 


In the primary market today, REC raised 10.9 bln rupees through perpetual bonds at a coupon of 8.03% as against 20 bln rupees that it had initially set out to borrow. 


"REC AAA rated perpetual bond is looked at as a better investment option as compared to banks AT1 bonds as Basel-III norm don't apply to these bonds. However, with the scheduled large issuances supply of bonds today and tomorrow, the pricing has become a little tight," said Venkatakrishnan Srinivasan, founder of Rockfort Fincap.


From the private sector, HDB Financial Services raised a total of 6 bln rupees through two re-issuances of its bonds, which were fully subscribed.




In the secondary market, Rajasthan's 2025-26 Ujwal DISCOM Assurance Yojana bonds worth 165 mln rupees were traded at a weighted average yield of 7.4004-7.4948%, according to data from the Reserve Bank of India's Negotiated Dealing System–Order Matching System.














Edited by Manisha Baxla


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