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Informist, Monday, Dec. 16, 2024

By Vidhushi RajPurohit

MUMBAI – Large amounts of maturities in December and tight liquidity conditions in the banking system led to increased issuances in the short-term debt market on Monday, dealers said. "There is a large redeeming amount this month, and plus issuers will have additional need of funds as December is both the quarter-end and the year-end period," a dealer with a state-owned bank said.

In December, INR 1.47 trillion is due for redemption through CDs, sharply higher than INR 629.45 billion in November. For CPs, the maturity due this month is INR 1.51 trillion, against INR 1.14 trillion in November.

On Monday, banks raised INR 68 billion through CDs, more than double the INR 26 billion on the previous trading day. Two banks tapped the CD market today – Axis Bank was the largest issuer, raising INR 50 billion through a three-month paper at 7.20%, while Canara Bank borrowed INR 18 billion at 7.58% through a paper maturing in a year. On Friday, Bank of India was the major issuer of CDs, raising INR 11 billion through a paper maturing in three months at 7.23%. 

Meanwhile, companies and non-banking financiers raised INR 48.75 billion through CPs, compared to INR 1 billion raised on Friday. Kotak Securities was the largest issuer, raising a total of INR 21 billion through two three-month papers with coupons of 7.59% and 7.60%. The other major borrower was HDFC Securities, which tapped the market to issue a three-month paper at 7.60%. On Friday, ICICI Securities was the biggest CP issuer, raising INR 6 billion through a three-month paper at 7.50%.

Active subscription from mutual funds kept the rates on debt instruments steady, dealers said. On Monday, rates on CPs issued by manufacturing companies with three-month maturity were quoted at 7.20-7.25%, unchanged from the previous close. Rates of papers of similar maturity issued by non-banking financial entities settled at 7.45-7.50%, unchanged from the previous day. Rates on three-month CDs also remained flat at 7.15-7.20%.

Dealers expect the rates to remain range-bound, as the market is factoring in both the large redemption amount and the easing of rates in the near term. However, dealers are also cautious about liquidity conditions in the banking system and how they evolve after the first tranche of the cut in the cash reserve ratio, which is effective from Saturday. According to data on the RBI's website, liquidity was in a surplus of INR 335.33 billion on Sunday.
 

--Primary market

* Canara Bank and Axis Bank raised funds through CDs.

* Godrej Consumer Products, Godrej Industries, Kotak Securities, HDFC Securities, SBICAP Securities and LIC Housing Finance raised funds through CPs.

--Secondary market

* Canara Bank's CD maturing on Dec. 24 was dealt five times at a weighted average yield of 7.0300%.
* LIC Housing Finance's CP maturing on Dec. 17 was dealt five times at a weighted average yield of 6.7552%.

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

End

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

Edited by Avishek Dutta

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