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India Corporate Bonds: Yields down 5-10 bps as market cheers BJP win

Friday, May 24

 

By Sanjana Raina

 

MUMBAI – Yields on corporate bonds fell by 5-10 basis points across maturities today as domestic investors as well as foreign institutional investors bought papers, in light of the overall positive sentiment in the market post-elections, dealers said.

 

While the Bharatiya Janata Party's resounding victory in Lok Sabha elections is seen paving the way for fresh foreign investment in corporate bonds, market players said the key factor that would shape such investment flows would be the rupee's trajectory against the dollar.

 

Strength in the rupee and weakness in crude oil prices aided sentiment. Today, the Indian currency closed at 69.5250 rupees per dollar, as against 70.0100 on Thursday.

 

"Post election results, sentiment in the market has turned more positive and, especially after the rupee appreciation, there was more participation by foreign investors and a few foreign banks," said a dealer with a mid-size brokerage firm.

 

Bonds issued by Housing Development Finance Corp, Indian Railway Finance Corp, Reliance Industries, LIC Housing Finance and NHPC,  with maturity up to 2022, were in demand.

 

"In the morning, there was good demand, especially in the three-year papers and some large trades were struck. Some foreign banks and some fund houses bought a lot today," a fund manager said.

 

Similarly, insurance companies and banks preferred bonds maturing up to 2029 in the secondary market. 

 

Separately, bonds issued by Food Corp of India, Power Grid Corp of India, REC and the National Bank For Agriculture and Rural Development, with maturity up to 2029, were also in demand.

 

Market participants hope that the government will now introduce new measures to boost liquidity in the banking system and spur consumer spending and economic growth. 

 

On the other hand, they expect the Reserve Bank of India to ease monetary policy and announce measures to support liquidity. The RBI's Monetary Policy Committee will detail its next policy statement on Jun 6.

 

Post market hours today, RBI announced it will buy 150 bln rupees of gilts through open market operations on Jun 13.

 

The National Stock Exchange today reported deals worth 67.99 bln rupees, compared with 80.37 bln rupees on Thursday. The BSE recorded deals worth 44.81 bln rupees, against 38.43 bln rupees in the previous session.

 

UDAY BONDS

In the secondary market, 550 mln rupees of Ujwal DISCOM Assurance Yojana bonds were traded today at a weighted average yield of 7.60%, according to data available on the Reserve Bank of India's Negotiated Dealing System-Order Matching System.  

 

* 500 mln rupees of Rajasthan's 2022 bonds were traded at 7.60% yield

* 50 mln rupees of Haryana's 2022 bonds were traded at 7.60% yield

 

BENCHMARK LEVELS FOR CORPORATE BONDS:

 

TENORS

  TODAY

 THURSDAY

Three-year

7.65-7.70%7.68-7.73%

Five-year

7.75-7.80%7.80-7.85%

10 years

8.15-8.20%7.20-7.25%

 

End 

 

Edited by Akshit Harsh

 

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