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Informist, Friday, Oct. 11, 2024

By Richard Fargose and Vidhushi RajPurohit

MUMBAI – The rates on short-term debt instruments remained steady Friday as the issuances of commercial papers and certificates of deposit were easily absorbed by mutual funds, dealers said. "Mutual funds are actively investing in the short-term debt papers," a dealer with a private bank said. "They have adequate funds, and in the last few weeks there were low issuances so now as the issuances have picked up, it is an avenue for them to reshuffle their portfolio."

The rates on three-month certificates of deposit were at 7.10-7.15%, unchanged from Thursday. The rates on commercial papers issued by manufacturing companies were also at the same level of 7.15-7.20%. Papers of similar maturity issued by non-banking financial companies were quoted at 7.50-7.55%, unchanged from Thursday.

CD issuances were the same as the previous day due to the absence of any big-ticket issuances. The total CD issuances stood at INR 9 billion, against INR 10 billion on Thursday.

Only two banks tapped the CD market. Federal Bank raised INR 5 billion at 7.60% by issuing a one-year CD. The remaining INR 4 billion was raised by Bank of Baroda from a three-month paper at 7.08%. 

"There is little need for banks to raise CDs this early in the beginning of a new quarter," a dealer with a state-owned bank said. "Surplus liquidity is there in the banking system and there are no scheduled outflows in the coming weeks." The surplus liquidity in the banking system Thursday was INR 1.34 trillion, slightly up from INR 1.29 trillion Wednesday.

Despite the prevailing surplus liquidity, market participants expect more banks to start tapping the market in the upcoming weeks to refinance their maturing papers. The amount of CDs due for redemption this month is INR 649.80 billion.

The amount raised from CP issuances was also less than Thursday's figure. Companies raised INR 25.75 billion, against INR 53 billion the previous day. Bajaj Finance and Export-Import Bank of India were the biggest issuers, raising INR 9 billion each. Bajaj Finance raised the amount at 7.30% from a paper maturing at the end of December. Export-Import Bank of India issued a three-month paper and raised the amount at 7.13%. L&T Finance was also a big issuer as it raised INR 6.25 billion at 7.45% from three-month CP. The remaining INR 1.5 billion was raised by GIC Housing Finance at 7.40%, also from a three-month paper.

"The issuances of CP are expected to pick up because companies will be in need of funds in the upcoming festive months," a dealer with a mutual fund said. "It is usual for CPs to surge in the last quarter (Oct-Dec) as that is the time when major festivals are lined up and thus companies are in need of funds."

--Primary market

* Federal Bank and Bank of Baroda raised funds through CDs.

* L&T Finance, GIC Housing Finance, Bajaj Finance, and Export-Import Bank of India raised funds through CPs.

--Secondary market

* Bank of India's CD maturing on Dec. 4 was dealt one time at a weighted average yield of 6.9802%.
* NTPC's CP maturing on Oct. 25 was dealt two times at a weighted average yield of 6.9011%.

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 Ashish Shirke

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