India Corporate Bonds:Ylds on 3-, 5-yr bonds slip tracking US T-bills

India Corporate Bonds:Ylds on 3-, 5-yr bonds slip tracking US T-bills

Informist, Wednesday, Oct 11, 2023


By Abhinaba Saha


MUMBAI – Yields on corporate bonds maturing in three to five years slipped 2-3 basis points in the secondary market today because of value buying after dovish comments from US Federal Reserve officials lifted investor sentiment. However, yields on 10-year bonds remained steady, dealers said. 


"Markets were in a good shape," said a chief investment officer at a large asset management company. "It is a continuation of the momentum that we saw yesterday. US Fed's comments have been a strong factor which has helped domestic yields."

Over Monday and Tuesday, US Federal Reserve officials said there would be no further rate hikes.


"I actually don't think we need to increase rates any more to get too-high inflation back down to the Fed's 2% goal," Atlanta Fed President Raphael Bostic said on Tuesday.


However, this does not indicate that the Federal Reserve would pivot to rate cuts any time soon.


Yield on the benchmark 10-year US Treasury note today was around 4.56%, against 4.70% at the time Indian market closed Tuesday. 


A fall in US Treasury yields along with a fall in the dollar index, and fall in crude oil and gold prices are indicative of return of positive sentiment in the market. This sentiment was reflected in the movement of government bond yields, dealers said.


However, investors will remain watchful of the Israel-Hamas conflict and possible involvement of Iran in the upcoming months.


The bond purchases on Tuesday and today follow a 15-20 basis points rise in yields since the Reserve Bank of India announced open market operations sales at its monetary policy outcome Friday.


Today, mutual funds and pension funds were on the buying side, while private banks and insurance companies were selling, a fixed income dealer said.


"PSU (public sector) banks are on the sidelines at elevated (yield) levels because of liquidity crunch as they don't want to book any loss," the dealer said.


At the start of the day, liquidity in the banking system was estimated to be in a deficit of 418.84 bln rupees, against a surplus of 16.07 bln rupees on Tuesday. Liquidity slipped into deficit due to a likely intervention by the RBI in the foreign exchange market, dealers said.


Bonds of National Bank for Agriculture and Rural Development, REC, Indian Railways Finance Corp, Andhra Pradesh State Beverages Corp, Power Finance Corp, Aditya Birla Finance and Navi Finserv were actively traded.


Deals aggregating 101.90 bln rupees were recorded on the National Stock Exchange and BSE combined, as against 74.21 bln rupees on Tuesday.


In the primary market, Power Grid Corp of India raised 22.5 bln rupees through 10-year bonds at a coupon of 7.70%. The issue was fully subscribed. 


According to merchant bankers, several non-banking finance companies and housing finance companies are planning to tap the corporate bond market in the coming days. 



In the secondary market, none of the Ujwal DISCOM Assurance Yojana bonds were traded today, according to data from the RBI's Negotiated Dealing System-Order Matching System.















With inputs from Sachi Pandey

Edited by Ashish Shirke


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