Corporate bond mart revving up

OUTLOOK/Corporate Bonds

There has been brisk activity in the secondary market towards the end of last week and the spread between the triple A five-year paper and corresponding gilt has narrowed down to 70 basis points as against 85 bp earlier.

Dealers are optimistic that middle-rung corporates will come to the bond market as they will be requiring a bank guarantee for accessing the overseas market.

To get a bank guarantee, corporates also need to get the Reserve Bank of India's approval for their plans.

The National Hydro Electric Power Corporation is expected to come into the market for borrowing, while Bank of India may raise Rs 25 crore as part of its tier-II capital.

Dealers added that there has been value-based buying from banks and mutual funds as gilt yields fell towards the end of the week.

The softening of gilt yields has been a fallout of the US payroll data which showed lesser number of jobs than expected.

However, barring these few issues, the bonds market have been lacklustre both in the primary as well as secondary side.

Commercial papers mart has a dry run

Commercial paper-linked working capital loan seems to have substituted short-term fund borrowings through the same route.

There are no primary issues and secondary market players are holding on to papers for better returns.

Mibor-linked issues have completely stopped as they are considered to be unlisted. Therefore the short-term avenues for corporates to raise funds through the bond route have virtually dried up.