Outlook : Corporate Bonds

Spreads contraction ahead

Long-term AAA-rated corporate bonds (of seven years and above tenor) are expected to register 10 to 15 basis points contraction in spreads in the secondary market over corresponding tenor government securities this week. Over the last one week the spread on five-year AAA paper has come down by 7-8 basis points and that on seven-year AAA paper by 10-12 basis points.

Boost for long papers

Players feel the difference in spreads between the AAA-rated five- and seven-year papers, which is currently at around 42 basis points, will narrow down afresh to about 25 basis points. Trading interest in long-term papers are seen high.

 

Bank support on cards

Banks, which have been aggressive in the bond mart recently, are expected to buy non-statutory liquidity ratio instruments at higher yields and at various levels. Trading volumes are expected to be good in the Rs 180-200 crore range.

Yields on CPs to hold at last week