Corporate Bond Volumes Soar On Uti Unloading

Daily trading volumes in corporate bonds has doubled to Rs 300 crore in the last two days with the Unit Trust of India (UTI) offloading its corporate bond holdings on the back of the crisis in its flagship scheme US-64.

The daily trading volume in the corporate bond market is generally in the range of Rs 100-150 crore depending on the yield movement in government securities.

Corporate bond dealers said the UTI has been selling from its portfolio to banks and financial institutions which, in turn, are unloading the paper in the secondary mart.

An investment banking source, however, said that a major chunk of the bonds has been sold through UTI Bank.

"UTI does not have the expertise of active trading in the bond market, but its banking subsidiary has, and hence many deals have been done through it," said the source.

A UTI Bank treasury official, however, said, "We used to do these kind of deals earlier also and we are doing it now as well. This has nothing to do with the present crisis in our parent organisation."

Corporate bond prices, which have been rising over the past one-and-a-half months, stopped their upward movement on the sudden rush of supply of bonds.

Yields on five-year, triple-A (AAA) rated non-convertible debentures have risen by five basis points from 9.45 per cent to 9.50 per cent in the last two days.

Dealers said sentiment was very nervous and prices volatile. "There is enough liquidity in the market and government security yields are also going down. Conditions are ideal for buying interest to pick up in the corporate debt market. But with the UTI offloading its portfolio, players are in a dilemma," said another dealer.