Outlook : Corporate Bonds

Prices of AAA papers are seen ranged...

The prices of AAA corporate bonds are expected to stay rangebound, with the spreads over the like-tenor government securities hovering in the range of 100-125 basis points. Other bonds could move by five to 10 basis points on either side. Overall, bond prices may remain directionless.

Meanwhile, if the inflation goes down, the rally in the government securities market will rub off on the corporate bonds.

... with lacklustre short-term sentiment

The market sentiment in the long-run will be positive because of softer interest rates. In the short run, however, it will be lacklustre. Trading will be mainly concentrate on AAA papers.

Increasing supplies of corporate papers, and no negative factors, could see the volume of corporate bonds go up to Rs 100 crore. Last week, the daily average volume was Rs 80 crore.

CP yields may stay flat

The yields on commercial papers will be capped at current levels, and are expected to hover between 6.15 per cent 6.25 per cent. The interest will be mainly in the short-end of the market. Volumes are expected to be thin despite ample liquidity in the banking system.

Few new issues

Three to four AAA-rated companies will come out with non-convertible debenture (NCD) issues, aggregating around Rs 500 crore. IRFC will raise Rs 350 crore via two NCD issues having five years (Rs 200 crore) and 15 year (Rs 150 crore) tenors. Not much activity is seen in the primary market. An infrastructure company plans to raise around Rs 50 crore through a CP issue at 6.02-6.05 per cent.