Yields on corporate bonds across tenures and maturities rose more than 20 basis points, tracking a rise in yields on government securities.
By Manish M Suvarna
Corporate bond issuances across tenures and maturities have fallen 56% month-on-month in January, due to a steep rise in borrowing costs following the spike in yields of government securities.
According to data compiled by Prime Database, companies and banks raised Rs 26,018 crore, sharply lower than Rs 59,551 crore raised in December 2021.
Reliance Jio Infocomm, National Bank for Agriculture and Rural Development (Nabard), LIC Housing Finance, Punjab National Bank, among others, remained top issuers in January. These companies raised almost 50% of total funds raised by companies and banks in January. “The volatility of the underlying sovereign benchmark curve with a 35 bps & 30 bps in 10-year and 2-year G-Sec in January could have impacted the yields demanded by investors for corporate bonds,” said Amandeep Chopra, group president & head of fixed income, UTI Mutual Fund.
Yields on corporate bonds across tenures and maturities rose more than 20 basis points, tracking a rise in yields on government securities. The December minutes of the US Federal Reserve have sent jitters across the market because of its rather hawkish stance. Currently, the yield on corporate bonds is trading in the range of 5.70% and 7.30% across tenure.
Additionally, mutual funds, which are also active investors in corporate bonds remained in the sidelines due to outflows from corporate bond funds and medium to long-duration funds. According to the Amfi data, corporate bond funds and medium to long-duration funds witnessed an outflow of Rs 935.73 crore and Rs 27.34 crore, respectively, in January.
Market participants said issuances are likely to remain lower in the coming months considering the uptick in yields. The cancellation of the weekly bond auction by the Reserve Bank of India (RBI) earlier this week eased yields on government bonds, even as issuers are waiting for a monetary policy committee’s outcome. “There has been stability emerging in bond yields after the budget. One needs to watch out for the RBI policy on February 10 for further cues,” Chopra added.
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