Scarce floats seen

OUTLOOK/ Corporate Bonds

Few primary issues are expected to hit the primary market, albeit in the one-year segment. The spread between the five-year gilt and corresponding corporate AAA paper has narrowed down to 40-45 basis points.

The secondary market will continue to remain active following the bullishness in government securities market. However, Sebi's decision to cap foreign institutional investors (FIIs) investment in corporate papers at $500 million has acted as a spoilsport.

Dealers said even though there will be buying in corporate papers owing to the yield differential, a rally is not expected as was seen few days back when Sebi excluded corporate debt from the $1.75 billion ceiling in debt market for FIIs.

Revival signs likely

Activity in commercial papers is likely to pick up with the renewed interest of foreign institutional investors in the segment.

Corporates, which were waiting for rates to mellow down before issuing new papers, might enter the market as rates have gone down. As on November 30, the total amount outstanding towards the issuances of commercial papers stood at Rs 10,150 crore.

Recap: There were brisk trades in corporate bonds after the Sebi announced that the bonds will be out of the purview of the $1.75 billion FII investment cap. Trades, however, were confined to one-year papers. With the slide in the gilt rates, the yield on corporate bonds have also come down.