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Informist, Monday, Feb. 3, 2025

By Kabir Sharma and Sachi Pandey

MUMBAI – Issuances in the short-term debt market surged Monday as rates eased somewhat, with pent-up demand for funds causing a spurt in new paper, dealers said. Six different issuers raised INR 114.00 billion through certificates of deposit Monday, while four issuers raised INR 62.25 billion through commercial paper.

"In January, a lot of banks were holding back on issuing CDs because there were a lot of maturities and rates were slightly higher. Now that the rates have eased and they did not borrow in January, so maybe some bunch of issuance would have come today," a senior fund manager at a mid-sized mutual fund house said.

Rates on three-month CDs were quoted at 7.45-7.50% Monday, a couple of basis points lower than on Friday. Rates on three-month CP issued by manufacturing companies were at 7.52-7.57%, largely unchanged from Friday. On Friday, the net liquidity injected by the Reserve Bank of India--a proxy for the deficit in the system--fell below INR 2.00 trillion for the first time since Jan. 19. The figure, which stood at INR 1.75 trillion Friday, declined further to INR 1.59 trillion Sunday.

Traders also said issuers were raising funds on forward value dates to manage their asset-liability portfolios for the Jan-Mar quarter. "There are bookings for forward value dates as they are trying to manage ALM (asset liability management) for the whole quarter, not for a single day. So some forward booking is also there," a dealer at a mutual fund said.

The National Bank for Agriculture and Rural Development was the largest issuer in both segments of the short-term market Monday, raising INR 45.00 billion via a one-year certificate of deposit at 7.62% and INR 50.00 billion through a three-month commercial paper at 7.50%. Bank of Baroda raised INR 37.50 billion at 7.45% via two separate certificates of deposit maturing in three months.

--Primary market

* Bank of Baroda, Small Industries Development Bank of India, NABARD, and Union Bank of India raised funds through CDs.

* Aditya Birla Money, Godrej Consumer, Motilal Oswal Financial Services, and NABARD raised funds through CP.

--Secondary market

* Bank of Baroda's CD maturing on May 5 was traded 11 times at a weighted average yield of 7.4679%.
* NABARD's CP maturing on Feb. 21 was traded once at 7.3509%.

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 Rajeev Pai

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