Corporate bonds rise 30 bps on foreign banks sell papers

Yields on 10-year corporate bond papers rose 30 basis points today as foreign banks offloaded positions substantially, dealers said. “Foreign banks were selling huge amounts in the secondary market on concerns of global credit crisis,” said a dealer with an insurance company.

A state-owned insurance company had bought bulk amounts in early trades today. Even the spread between the 10-year corporate bond and corresponding government paper widened further to 315 basis points from 250 basis points last week. The 10-year benchmark 8.24 per cent, 2018 government paper closed at 7.98 per cent today, compared with 8.11 per cent on Tuesday. “Widening of the spread between corporate bonds and gilt paper also lured investors to invest in the longer tenure papers,” said a primary dealer.

The spread between 10-year corporate bond and gilt has widened to 362 basis points on Wednesday compared with 319 basis points on Tuesday.