Corporate bond volumes see drastic fall in secondary market

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Published: February 23, 2019 12:28:21 AM

Corporate bond volumes traded in the secondary market have fallen drastically in the past two months with volumes traded in January falling by nearly 60% against the September 2018 levels on account of muted selling by bond holders, say dealers.

Corporate bond volumes see drastic fall in secondary marketCorporate bond volumes see drastic fall in secondary market

Corporate bond volumes traded in the secondary market have fallen drastically in the past two months with volumes traded in January falling by nearly 60% against the September 2018 levels on account of muted selling by bond holders, say dealers.

Total traded volumes of corporate bonds stood at Rs 39,660 crore in January, nearly 60% lower than the volumes traded in September 2018, and 4% lower than in December, according to Care Ratings. “Due to high liquidity pressure till September, bondholders sold at any level but currently with higher interest rates and an expectation for yields to fall, market players are holding on,” said Ajay Manglunia, EVP, Edelweiss Financial Service.

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Corporate bond yields across all maturities and rating categories over the past three quarters in FY19 averaged to 9%, up 70 bps year-on-year than FY18, and is the highest in the past four years, according to a Care ratings report.

Dealers expect corporate bond yields to gradually drop following rate cut by the Reserve Bank of India by 25 bps to 6.25% in February this year and also due to falling inflation numbers.

“Right now, yields are high, so people would buy good quality papers and hold them leading to higher issuances,” added Manglunia.

Corporate bond issuance through the private placement route surged to an eight-month high at `84,925 crore in December, up 35% month-on-month.

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