Stamp duty boost for CPs

OUTLOOK: Corporate bonds

Tracking the government securities market, corporate bonds are likely to rule range-bound this week.

Corporate borrowers may tap into the market only after the new fiscal as most of the borrowings for the current year is over. Tier-II bond issues from banks are likely to continue till the end of this fiscal.

The secondary market will continue to be lacklustre as market players hold large number of short-term papers.

"Given a rally in government securities, some of these players may offload their positions which will further hike the yields," said a dealer.

Commercial papers are likely to get a boost after the rationalisation of stamp duty announced in the Budget to remove anomalies. At present, non-banking players like mutual funds pay higher stamp duties than banks.

If the stamp duty is slashed, more players could subscribe commercial papers and consequently corporate issuers will be in a bargaining position in terms of interest rates.

Recap: The spread between the triple A, five-year bonds and the government security of similar tenure continues to be around 50 basis points. This is because the yields on corporate bonds across maturities have gone up by 15-17 basis points in tandem with the stickiness in government securities.