Trading Likely To Be Brisk, With An Eye On Gilts

Corporates bonds will track the trend in the government securities market, which is riding on bullish sentiment.

Activity is expected to be brisk as there are few top-rated papers with good stock available in the market.

There was good trading in corporate bonds last week with activity concentrated in the Unit Trust of India bonds and oil bonds, and the Indian Railway Finance Corporation paper.

Two corporates tapped the primary market last week which might witness some activity.

The Industrial Development Bank of India (IDBI) and the Rural Electrification Corporation (REC) came out with floating rate papers.

While the IDBI tapped the market with floating rate issue of the longest tenor of three years with a coupon-based on Mibor and a put and call option after one year, REC came out with a 1-year paper with coupon set at a spread over Mibor with floor and cap rates set at 5 per cent and 6 per cent, respectively.

 

Although spreads have already touched very low levels for heavily traded papers, they are expected to come down to 20-25 basis points this week, while for others it will settle at 40-45 basis points to comparable maturities.

Commercial paper

Commercial papers remained lacklustre last week with few corporates approaching the market.

GE Capital Services and Power Finance Corporation raised three-month money at 5.27 per cent and 5.05 per cent, respectively, for papers maturing in August and July 2003, respectively.