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Informist, Monday, Jan. 6, 2025

By Vidhushi RajPurohit

MUMBAI - Issuances in the short-term debt market saw a surge Monday as companies and banks flocked to the market to roll over their borrowings set to mature this month, dealers said. The demand for funds was evident as borrowers tapped the market despite the prevailing high borrowing rates. 

Rates on three-month certificates of deposit issued by banks were quoted at 7.35-7.40%, up 5 basis points from the previous close. Similarly, rates on three-month commercial papers issued by manufacturing companies were also up 5 bps at 7.40-7.45%. Rates on similar-maturity CPs issued by non-banking finance companies were sharply up at 7.70-7.75%, up 25 bps from 7.45-7.50% previous day.

"The rates are still a bit high as the rise that we see near quarter-end has not cooled down yet and mutual funds also still have a cash crunch," a dealer at a private bank said. "Though the issuances have picked up, once the liquidity conditions ease and mutual funds also receive some inflows the issuances will rise." On Sunday, the net liquidity injected by the RBI was at INR 289.58 billion, RBI data showed. 

On Monday, banks raised INR 60 billion, in stark contrast to Friday when they did not tap the market at all. Union Bank was the largest issuer of CD, borrowing INR 25 billion at a rate of 7.60% through a one-year paper. The next big issuer was Indian Bank, raising INR 20 billion through a three-month paper at 7.47%. The remaining INR 15 billion was borrowed by Bank of Baroda through a three-month paper at 7.45%. 

In the CP segment, the total issuances amounted to INR 46.75 billion, compared to the INR-10.5-billion raised Friday. The National Bank for Agriculture and Rural Development was the largest issuer of CP, raising INR 18.50 billion through a three-month paper at 7.46%. It was closely followed by borrowing by Reliance Industries, which amounted to INR 17.50 billion through a three-month paper at 7.17%. 

In the secondary market, banks and mutual funds sold short-tenure papers to liquidate their holdings and get access to funds, dealers said. Trade volume of CD traded in the secondary market was at INR 99.45 billion, up from INR 64.00 billion Friday.

Mutual funds invested in longer-tenure papers to lock in the higher yields to hedge against the likely easing of rates in upcoming days, dealers said. Traders remain expectant regarding a probable repo rate cut by the RBI's rate-setting panel at its next meeting in February with growth slowing.

--Primary market

* National Bank for Agriculture and Rural Development, Reliance Industries, ICICI Securities, Axis Securities, Godrej Industries and L&T Finance raised funds through CPs.

* Union Bank, Bank of Baroda and Indian Bank raised funds through CPs.

--Secondary market

* Punjab National Bank's CD maturing on Jan. 10 was traded six times at a weighted average yield of 6.9912%.
* Small Industries Development Bank of India's CP maturing on Feb. 28 was traded twice at 7.2148%.

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

Edited by Vandana Hingorani

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