Corporate bond yields fall on fund buying

Yields fell up to 5 basis points today as mutual funds stepped up buying corporate bonds, noting inflows into their schemes, dealers said.Thus far, fund managers had kept off purchases in the corporate bond market after being hit by a severe liquidity crunch as banks and companies redeemed investments in fund schemes to meet their own cash needs.The only saviours were insurance companies and provident funds at such times for corporate papers, both in the secondary as well as the primary issuance market.

A sharp fall in gilt yields also prompted some investors to buy corporate bonds to avail themselves of better returns.

Yields on the 10-year benchmark 8.24 per cent, 2018 government bond have fallen over 30 basis points since the last two weeks. Today, the 2018 paper ended at 7.05 per cent compared with 7.07 per cent on Friday.

“Volumes in corporate bonds are also rising due to the huge supply in the secondary market as there were lot of issuances in November,” said a dealer of an insurance company.