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Informist, Wednesday, Jan. 15, 2025

By Vidhushi RajPurohit

MUMBAI – The trend of issuing short-term debt papers for one-year maturity continued on Wednesday, as the rates on papers maturing in three months remained elevated, dealers said. Of the nine issuers that raised funds through commercial papers and certificates of deposit on Wednesday, six borrowed through papers that are maturing in 11–12 months. 

"If the banks' ALM (asset liability management) allows it, then it makes more sense for banks to go for borrowing for longer tenure even if the rates are high, as otherwise, they will again need to roll over that paper when rates are high," a dealer at a state-owned bank said.

In the secondary market, mutual funds were seen selling papers due for maturity in January and February and deploying funds in papers that are set to mature in March. Traders expect the rates on commercial papers and certificates of deposit to remain high in March owing to redemption pressure, which is usually high during the quarter-end period.

After a mute spell for two days, banks and non-banking companies tapped the primary CD market on Wednesday to raise INR 90 billion. The National Bank for Agriculture and Rural Development was the largest issuer of CDs, raising INR 50 billion through a one-year paper at 7.72%. The other issuers were ICICI Bank and Union Bank, which raised INR 20 billion each. ICICI Bank borrowed through a three-month paper at 7.55% and Union Bank issued a one-year paper at 7.69%.

Issuances of commercial papers also increased to INR 63.25 billion from INR 40.25 billion on Tuesday. Bajaj Finance was the largest issuer, raising INR 40.25 billion through a three-month paper at 7.90%. The non-banking financial company was the largest CP issuer on Tuesday as well, raising INR 15 billion for three months at 7.90%. 

According to data compiled by Informist, CPs worth INR 879.29 billion are set to mature in January. Out of this, INR 203.46 billion is set to mature this week, of which Bajaj Finance's redemptions are estimated at INR 7.95 billion.  

The rates on three-month CPs issued by manufacturing companies remained flat at 7.55-7.60%, dealers said. Rates on similar-maturity CPs issued by non-banking finance companies were also flat at 7.70-7.75%. The rates on the three-month CD were unchanged from Tuesday at 7.55-7.60%. 

--Primary market

* ICICI Home Finance, Julius Baer Capital India, Tata Capital Housing Finance, Bajaj Housing Finance, Bajaj Finance and Kotak Mahindra Prime raised funds through CPs.

* ICICI Bank, Union Bank and National Bank for Agriculture and Rural Development raised funds through CDs.

--Secondary market

* Small Industries Development Bank of India's CD maturing on Jan. 16 was traded six times at a weighted average yield of 6.4124.
* LIC Housing Finance's CP maturing on Mar. 4 was traded twice at a weighted average yield of 7.2935%.

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 Saji George Titus

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