There are no issues expected this week till Sebi clarifies on the participation of the qualified institutional buyers (QIBs) of the corporate bonds.
The diktat poses an operational problem as the QIBs, like mutual funds, banks and financial institutions, rely on brokers to route these transactions.
Although trades this week were choppy due to the firming up of the rates of the underlying government securities, some buying demand also came from investors looking to leverage yield differentials.
At present, the spread between the triple A five-year corporate paper and a gilt of similar maturity hovers around 70 basis points. Some buying demand is expected later this week as buyers will have limited choice of papers in the absence of fresh issues.
If the interest rates of the underlying government securities do not go up, there might be selling of corporate bonds, which could push up the yields.
However if the underlying rates move up, the yields on corporate bonds will firm up too. Either way, the movement in yields on the corporate bonds will range between 10 and 15 basis points.
Commercial paper
Even though the 91-day treasury bills are trading at 4.62 per cent, the RBI has announced a cut-off rate of 4.80 per cent in an effort to correct the yield curve, which flattened after the ten-year yield touched 4.95 per cent.
The RBI also hiked the rates of long-term papers through open market operation and auction. Following this, rates in the primary market have also gone up. Bajaj Auto Finance could raise 90-day money at 5.20 per cent.
