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Informist, Thursday, Dec. 5, 2024

By Kabir Sharma

MUMBAI – Caution in the wind ahead of the Reserve Bank of India's Monetary Policy Committee meeting outcome on Friday led to a sharp fall in issuances in the short-term debt market on Thursday, dealers said. Banks borrowed around INR 12.50 billion through certificates of deposit Thursday, down from INR 50.00 billion on Wednesday.

"While there were steady issuances, most dealers will get a clear picture of the rate trajectory after the MPC outcome, so issuances will likely pick up further on," a dealer with a private bank said. Market expects a 25-basis-points cut in the Cash Reserve Ratio by the RBI at Friday's Monetary Policy Committee. "If there is a cut in CRR then the systemic liquidity will see a rise and that will lead to ease in the rates of debt instruments." Rates on CDs maturing in a year were quoted at 7.50-7.55% in the secondary market, unchanged from Wednesday's close, dealers said.

Punjab National Bank and UCO Bank were the only CD issuers on Thursday. PNB borrowed INR 10 billion at 7.49%, through paper maturing in one year and UCO Bank raised INR 2.5 billion at 7.20% through paper maturing in three months. "Issuances today (Thursday) were mostly driven by the issuers' redemption needs," a dealer with a state-owned bank said. "There is also quarter-end funding needs, so it is a cyclical trend for issuances to pick up at year-end."

Commercial paper issuances also fell sharply on Thursday as issuers were looking forward to the RBI's MPC on Friday and were hoping that it would provide some liquidity easing measures, which will lead to easing of rates, dealers said.  

Market participants said there was ample demand from mutual funds but issuers were waiting for Friday before going heavy on issuances. "Fund houses were looking to invest in long-term paper amid rate-cut expectations in the market," a dealer with a brokerage firm said. "Overall, the rates were largely on the same level as the previous day, but they have cooled down since last month and if the CRR cut does happen, then they will ease further."

On Thursday, ICICI Securities was the largest issuer, raising INR 5.50 billion through CP expiring in three months at 7.50%. It was followed by Brila Group Holdings raising INR 4 billion through a three-month paper at 7.58%.

The three-month commercial paper issued by non-banking financial companies was at 7.50-7.60%, dealers said. Papers of similar tenure issued by manufacturing companies were quoted at 7.25-7.30%, same as the previous day.

--Primary market

* UCO Bank and Punjab National Bank raised funds through CDs.

* Birla Group Holdings, Pilani Enterprises, Axis Securities, ICICI Securities and IGH Holdings raised funds through CPs.

--Secondary market

* HDFC Bank's CD maturing on Dec. 6 was dealt 12 times at a weighted average yield of 6.5546%.
* Reliance Retail Ventures' CP maturing on Dec. 6 was dealt eight times at a weighted average yield of 6.5654%.

At 1700 IST, the following were the volumes, in INR billion, 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 Akul Nishant Akhoury

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