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Informist, Thursday, Dec. 26, 2024

By Vidhushi RajPurohit

MUMBAI – The activity in the short-term debt market was largely muted as most banks and companies have met their funding needs ahead of the quarter end, dealers said. Elevated borrowing rates on reduced demand from mutual funds also led to low issuances in the debt segment, dealers said.

"It's the end of the month and mutual funds are a bit tight on cash, so they are not that active in the primary market right now, which has kept the rates up," a fund manager at a mutual fund said. Dealers also cited the current liquidity deficit as the reason for the elevated borrowing rates. According to RBI data, the liquidity deficit was at INR 2.12 trillion on Wednesday, against INR 2.05 trillion on Tuesday.

Rates on three-month certificates of deposit issued by banks rose 5 basis points from Friday to 7.40-7.45%. Similarly, rates on three-month commercial papers issued by manufacturing companies rose by 10 bps to 7.45-7.50%. However, rates on similar-maturity commercial paper issued by non-banking finance companies were unchanged at Friday's level of 7.50-7.55%.

Amid redemption pressure, mutual funds continued to sell papers of shorter maturity in the secondary market, dealers said. "Some banks who have adequate funds were likely buying in the secondary market, but fund houses were mostly trying to liquidate their papers," a fund manager with a mutual fund said.

On Thursday, banks raised INR 55.75 billion through CDs, down from INR 65 billion raised on Tuesday. Big borrowing by Canara Bank kept the issuances afloat. The bank raised INR 38 billion through a one-year paper at 7.66%. The remaining amount was mopped up by HDFC Bank through a three-month paper at 7.45%. "Despite the high rates, some banks are still borrowing to maintain their balance sheet requirements," a dealer at state-owned bank said.

Issuances through CP also slumped to INR 6.5 billion from INR 18 billion raised on Tuesday. Only two companies tapped the CP market--ICICI Securities and Bajaj Financial Services. ICICI Securities was the largest CP issuer, borrowing INR 5 billion through a two-month paper at 7.48%. 

--Primary market

* HDFC Bank and Canara Bank raised funds through CDs.

* ICICI Securities and Bajaj Financial Services raised funds through CP.

--Secondary market

* State Bank of India's CD maturing on Dec. 27 was dealt 17 times at a weighted average yield of 6.5551%.
* Motilal Oswal Financial Services's CP maturing on Dec. 27 was dealt twice at a weighted average yield of 7.0093%.

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:

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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