Trading volumes of bonds soar

High volumes seen continuing because of lesser government borrowings, more rate cuts

Trading volumes in corporate bonds and government bonds have picked up significantly in the last few months on anticipation of a rate cut by the Reserve Bank of India (RBI).

The Street expects that after the start of the rate cut cycle in January 2015, there is scope for more monetary easing due to which high trading volumes are seen sustaining.

Data from Securities and Exchange Board of India (Sebi) shows that trading volumes for corporate bonds which stood at Rs 75,040 crore in April jumped to Rs 1.18 lakh crore in January while data from Clearing Corporation of India Limited (CCIL) shows that trading volumes in government bonds (outright and repo) jumped to Rs 18.7 lakh crore in January compared with Rs 12.33 lakh-crore in April.

“Banks were actively trading in bonds since a rate cut was expected. The treasury gains of banks were also impressive. Now the market is waiting for the Union Budget and there are expectations of further rate cuts,” said the head of a treasury of a state-run bank.

The Union Budget will be announced later this month and there are expectations that for the next fiscal the market borrowings of the government will be lesser than what it was in the current fiscal. The street also believes that further rate cut of at least 50 basis points is in store in 2015.