The gains will be capped as the central bank's record surplus transfer to the government has boosted market sentiment
Traders were also cautious after the 10-year US yield moved off its recent lows, but continued to remain around the 4.35 per cent mark.
The central bank said it would buy back Rs 60,000 crore worth of securities, maturing this financial year, on May 21
While overall credit growth is predicted to moderate in FY2025, domestic bond issuance is expected to rise, driven by attractive interest rates and potential foreign investment.
The selloff came on the day when the rupee fell by the most in six months
Traders reportedly adjusted positions in anticipation of an increase in state govt securities supply on Tuesday
For bulls who powered the massive rally, the tactical trade at the moment is to move into the bonds, whose appeal has been further burnished by the nation's improving finances
The original 'Fragile Five' which also included Turkey, South Africa and Brazil referred to nations perceived to be most at risk due to their heavy reliance on foreign investment to drive growth
It may be time to alter the balance in the Indian corporate bond market, which has been skewed towards 'AAA' and 'AA' rating categories for long now
Recent bond auctions saw bids that surpassed expectations, said Alok Singh, group treasury head at CSB Bank
Behind those record returns were bold bets on catastrophe bonds and other insurance-linked securities
The fall in US Treasury yields and foreign portfolio investor (FPI) inflows further aided rupee and bonds
"The muted reaction currently is due to weak global risk appetite," Sambor, who said inflows could rise if India becomes a part of other global indices
The inclusion is expected to spur staggered inflows of $22-$30 billion, analysts estimate
Some investors with a greater risk tolerance may find high-yield corporate bonds attractive, particularly in low-interest-rate environments.
The cracks in demand are already starting to show, as the government sold bonds at higher-than-expected cut-off yields at an auction on Thursday
Fairfax-backed IIFL Finance on Friday said it has fully repaid its maiden USD 400 million bond on maturity this month. The retail focused non-bank had raised the money as part of its medium-term note programme in February 2020. Kapish Jain, its group chief financial officer, said the company had pre-paid a portion of the bond early last fiscal -- FY23. Earlier this month, the Canada-based company had secured USD 100 million in long-term funding from Export Development Canada and Deutsche Bank. IIFL Finance had a loan book of Rs 57,941 crore in December 2022. It offers home loans, gold loans, digital loans and micro finance loans.
The nation's dollar bonds have returned 20 per cent this year, the top performers
Yield curve flattens; T-bill, 10-year bond spread now at 16 bps versus 222 bps a year ago
The last instalment, which the firm has requested an extension for, is worth Rs 124.72 crore