Indian corporate bond yields ended lower on Friday as robust investor appetite seen at a federal bond auction helped sentiment, with continuous open market operations from the central bank also aiding. Strong demand was seen in a 140 billion rupee ($2.66 billion) bond auction which saw the cut off yields for the 7.83 percent 2018 bonds and 8.79 percent 2021 bonds in the sale come in lower than market expectations in a Reuters poll.
The five-year yield ended 5 basis points lower at 9.38 percent and 10-year corporate bond yield closed lower at 9.30 percent, 5 basis points lower than Thursday's close. After markets closed, the Reserve Bank of India said it bought back 84.71 billion rupees of bonds versus a target of 120 billion rupees.
Banks' borrowing from the RBI's repo operation, through which it injects liquidity, fell below one trillion rupees on Wednesday, after largely remaining above that level since December 15. On Friday, the borrowing was 923.7 billion rupees. The spread between the 10-year corporate bond and a similar maturity government bond widened to 88.23 basis points from 84.04 on Thursday. Total volume in the corporate bond market was 15.51 billion Indian rupees, compared with Thursday's 20.40 billion rupees.