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Informist, Wednesday, Jan. 29, 2025

By Sachi Pandey

MUMBAI – Rates on short-term papers fell by 3 basis points on Wednesday as inflows from the government's month-end spending cooled the liquidity strain, dealers said. The measures announced by the Reserve Bank of India also started to work through the market, they said. "Slowly, the rates will keep on going down from here," a fund manager at a mid-sized mutual fund house said.

On Tuesday, the net liquidity injected by the RBI--a proxy for systemic liquidity conditions--fell to INR 2.51 trillion from INR 3.10 trillion Monday, aided by the government's month-end spending, dealers said. Market participants expect around INR 1.2 trillion to flow into the banking system due to government month-end spending. The RBI on late Monday announced plans to inject up to INR 1.5 trillion of liquidity by the third week of February, starting with the open market purchase of INR 200 billion of government bonds on Thursday.

Rates on three-month certificates of deposit on Wednesday were quoted at 7.47-7.52%, down from 7.50-7.55% on Tuesday. Rates on three-month commercial papers issued by non-banking finance companies were also quoted 3 bps lower at 7.82-7.87%. The indicative levels for manufacturing companies' three-month papers were 7.52-7.57%.

Following the decline in rates, commercial paper issuances increased Wednesday. L&T Finance was the major issuer, raising INR 10.00 billion through three-month papers at 7.86%. Overall, a total of INR 28.75 billion was raised on Wednesday through three-month papers, up from INR 13.50 billion on Tuesday.

However, issuances of certificates of deposit slipped marginally, with banks raising INR 82.50 billion compared to INR 92.50 billion on Tuesday. Bank of Baroda was the major issuer of CDs, raising INR 30.00 billion via a three-month paper at 7.47%. According to dealers, banks are not actively seeking funds through the short-term market as they are "not giving out credit the way they were giving last year". "Because of that, they are not actively raising funds through the short-term market, except for rollovers and maturities requirements," a dealer at the brokerage firm said.
 

--Primary market

* Godrej Industries, ICICI Securities, L&T Finance, Axis Finance, Kotak Securities, Poonawalla Fincorp, and Birla Group Holdings raised funds through CP.

* Bank of Baroda, Indian Bank, Punjab & Sind Bank, and Canara Bank raised funds through CDs.

--Secondary market

* Bank of India's CD maturing on Feb. 24 was traded twice at a weighted average yield of 7.3296%.
* Tata Capital Housing Finance's CP maturing on Thursday was traded six times at a weighted average yield of 6.6013%.

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 Saji George Titus

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