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Informist, Thursday, Oct. 3, 2024

By Vidhushi RsjPurohit and Richard Fargose

MUMBAI – Rates on certificates of deposit and commercial papers remained largely unchanged from Tuesday due to subdued issuances in the short-term debt market, dealers said. Markets were shut Wednesday for Gandhi Jayanti.

Rates on three-month CDs were quoted at 7.20-7.25%, the same as on Tuesday. The rates on three-month CPs, except for the paper issued by manufacturing companies, largely remained on the same levels, dealers said. Commercial papers issued by non-banking finance companies of three-month maturity were at 7.60-7.65%, the same as the previously quoted rates. Meanwhile, paper of similar maturity by manufacturing companies was at 7.25-7.30%, slightly down from 7.30-7.35% on Monday.

Only IndusInd bank tapped the CD market today, as it raised INR 10 billion by issuing a paper with maturity on June 2025 at 7.58%. "Most banks have aggressively tapped the CD market in September, hence the issuances are a bit subdued now," a dealer with a state-owned bank said. "The issuances of CD will pick up this month, when the maturity of the papers will be near and banks will require funds to refinance the papers."

The liquidity in the banking system returned to surplus towards the end of September and banks have adequate surplus for now, dealers said. However, dealers are of the view that the CD issuances would not be impacted much by the high systemic liquidity as they still need funds to meet the credit demand. The CD issuances in September were at INR 1.45 trillion, 96.29% higher than a year ago.

Majority of the issuances in the month of September were through the issuances of three-month paper. Market participants said the reason for the preference of three-month maturity paper was the expectation of a policy rate cut in December. On Thursday, the 91-day T-bill was quoted by the RBI at 6.4729%, which was below the repo rate of 6.50%. Dealers believe that the reason for the low yield was likely due to the rate-cut chances in the month of December. 

Reliance Jio Infocomm was the biggest issuer, borrowing INR 35 billion at 7.12% by issuing a CP maturing on Dec. 16. No other company tapped the CP market. Dealers said that the low participation in the CP market will likely reverse in the coming days as companies will tap the market to meet the funding requirements for the upcoming festive months.  

--Primary market

* IndusInd Bank raised funds through CDs.

* Reliance Jio Infocomm raised funds through CP.

--Secondary market

* Punjab National Bank's CD maturing Oct. 25 was dealt three times at a weighted average yield of 6.9005%.
* Small Industries Development Bank of India's CP maturing May 28 was dealt five times at a weighted average yield of 7.5399%.

At 1700 IST, the following were the volumes, in billion rupees, in the secondary market for short-term debt, as detailed by the Clearing Corp of India's F-TRAC platform:

NOTE: Details of the deals have been received from market sources.

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Deepshikha Bhardwaj

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