One key reason for the strength is the Reserve Bank of India’s ₹500 billion open market operation (OMO), which has been widely discussed by the market over the past week. This move has provided much-needed support to bond prices.
Another positive factor is the lower-than-expected supply of state government bonds. Around 11 states are planning to raise about ₹260.8 billion, compared with ₹361.9 billion indicated earlier in the borrowing calendar. This reduced issuance has eased supply concerns and supported bond prices.
While government bonds are steady, the real action is in the corporate bond space. Power Finance Corporation (PFC) has launched the first tranche of its public issue of non-convertible debentures (NCDs), aiming to raise ₹50 billion. The issue opened on Friday (January 9) and is scheduled to close on January 30.
If fully subscribed, this will be the largest retail bond issue in nearly eight years. PFC is offering bonds with maturities of five years, ten years, ten years and one month, and fifteen years.
The annual yields range from 6.8% to 7.3%, with the highest return offered on the 15-year bond. The issue has generated strong interest among investors.
Adding to the positive mood, the SEBI chief recently said the regulator is examining the possibility of introducing trading in bond derivatives. This is aimed at deepening India’s corporate bond market.
Earlier, NITI Aayog had also released a detailed report suggesting several measures to strengthen and expand the corporate bond ecosystem.
Meanwhile, markets are also closely watching India’s consumer price inflation (CPI) data, scheduled to be released at 4 pm today (January 12). The data is expected to influence both the bond market and the rupee in the near term.