Stabilisation time ahead
Yields on corporate bonds in the secondary market are seen stabilising at current levels. With the banking system awash with funds and with mutual funds and banks making fresh investments in non-statutory liquidity ratio papers, yields on the best rated papers could come down by a maximum of five basis points.
Spreads have widened in the corporate bond mart. The best-rated Hindalco paper, which was quoted at a spread of 60 basis points above corresponding gilt two weeks ago, was traded at a spread of 62 basis points last week.
Yields on the popular AAA and AA+ five-year papers may hover around 7 per cent and 7.25 per cent, respectively.
With housing finance major HDFC tapping the market with a five-year bond at a fine coupon of 7.05 per cent, players feel the yield on the Hindalco paper could go down by about 5 basis points. The Hindalco paper is seen trading in the 6.95-7.02 per cent band this week.
While yields on the best-rated five-year papers have come down by around 40 basis points in the last couple of weeks, yields on short papers have come down by only 10 basis points. Players said a repo rate cut could set right the slight distortion in yields.
New issues
LIC Housing Finance is expected to tap the market for raising around Rs 150 crore with a seven-year bond issue. Subordinated debt issues of a couple of public sector banks are also expected.
CP trend
Yields on commercial papers in the secondary market are seen hovering at last week
