Top-rated non-SLR papers could see good trades

OUTLOOK/CORPORATE BONDS

AAA-rated long-tenor non-statutory liquidity ratio (non-SLR) papers will see good trading interest as market participants (mutual funds, primary dealers and banks) are seen making purchases on expectations of large subscriptions by pension funds next month.

The market has sniffed an opportunity and is front-running the provident funds. The provident funds are expected to park a part of the estimated Rs 8,000 crore inflows received by way of interest payments on the special deposit scheme (SDS) in the corporate bonds in January.

Long tenor papers from the IRFC, PFC, PGC stable will see active trading. The NHPC, which is rated 'AA+', will see good interest as it offers a good yield pick up.

Come January, market players are expecting PFs to invest in these papers.

The yield differential between the best rated five year corporate bonds and the corresponding maturity gilt i.e the spread will continue to hover in the 60-70 basis points band.

Market players aver that Mibor-linked papers will hit the market in a big way in the first week of January as the Securities and Exchange Board of India has clarified that debt instruments having a tenor of less than one year need not be listed.

The Konkan Railway Corporation (KRC) is expected to tap the debt mart with a Rs 200 crore non-convertible debenture issue. The Corporation has a 'AAA' rating on account of the financial support provided by the Government of India on timely payment of interest and principal obligations.

The Andhra Pradesh Water Resources Development Corporation, whose issue closes on January 10, has raised Rs 366 crore so far. The issue opened on November 6.

The Corporation has planned for a Rs 350 crore issue with a greenshoe option. A five year investment in APWRDC will return eight per cent while a seven year investment will fetch 8.20 per cent.