Selling trend to continue

Outlook/ Corporate bonds

 Some short-term papers were floated by Citicorp and Central Bank of India. The tier-II issue of Central Bank of India closed early on 25th September after opening on 24th September.

 The bank issued bonds for Rs 200 crore at a coupon of 5.80 percent for 79 months to augment its capital adequacy ratio, which stands above 11 per cent as on June 30, 2003 against the RBI-stipulated 9 percent.

 Primary issuers are likely to adopt a wait-and-watch policy this week, which will mostly see a selling owing to intervening holidays.

 Moreover, a close watch is being kept on the inflows from the RIB proceeds and the pursuant reaction of the central bank.

 The distribution of gilts of various maturities in the auction calendar for the second half is likely to impact yields of various maturities.

 Once a clear trend emerges on the likely movement of the curve, fresh issues will venture into the market.

 Last week corporate bonds saw good demand from mutual funds which were reducing the duration of the portfolio as well as churning it for better returns. Most funds have also zeroed in on AA papers, which in due course are likely to be upgraded.

 Credit policy blues loom

 Second-rung corporates such as GE countrywide, Vam Organics have ventured into the market for raising short-term money. With call rates firming up last week, there have been not many Mibor-linked papers.

 Moreover with banks heading towards their half-yearly closures, most players have squared up their positions and are not subscribing to commercial papers (CPs).

 Short-term players are also expected to take it easy as the yields in this tenor are likely to be realigned in case of a repo rate cut.

 In fact, the market is waiting for the credit policy to get over so as to get a cue on the market yields, policy stances and view point of the regulator for the second half of the year.