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Informist, Tuesday, Feb. 4, 2025

By Siddhi Chauhan

MUMBAI – Short-term debt issuances were robust on Tuesday as issuers in need of funds took advantage of renewed investment appetite of mutual funds, dealers said. Issuers raised INR 77 billion through commercial paper and INR 87 billion through certificates of deposits on Tuesday. 

"Mutual funds are flushed with inflows right now so they are investing before rates fall any further," a dealer at a brokerage fund said. "Many people are expecting the RBI to cut rates on Friday. It will be beneficial from an issuers' perspective, but an investor will always want to lock in higher rates right." 

Money market remains split with traders divided on the chances of the Reserve Bank of India's Monetary Policy Committee cutting the repo rate at its three-day meet ending Friday, dealers said. While some expect the rate setting panel to cut rates by 25 basis points, a few see chances of more focus on easing liquidity conditions by conducting various liquidity measures, dealers said.

In the week ended Jan. 31, the RBI purchased government bonds through open market operation auctions, injecting INR 200.20 billion into the banking system, dealers said. The central bank also conducted a dollar/rupee buy/sell swap on Jan. 31 which added around INR 400 billion to the system, dealers said. The RBI is also set to carry out two more open market operations for INR 400 billion this month, along with a 56-day variable rate repo of INR 500 billion on Friday.

On Tuesday, four issuers borrowed funds as high as INR 11 billion through CPs. Hero Finncorp was the highest CP issuer, raising INR 10.5 billion through one-year paper at a rate of 8.17%. National Bank for Agriculture and Rural Development and Cholamandalam Finance raised INR 10 billion each through three month paper at a rate of 7.50% and 7.90% each. L&T finance raised INR 10 billion through one-year paper at 7.75%. 

Similarly, a rise in CD issuances was seen on Tuesday despite a fall in liquidity deficit, dealers said. On Monday, the net liquidity injected by the RBI--a proxy for systemic liquidity deficit--fell to INR 1.08 trillion from INR 1.59 trillion on Sunday. Liquidity deficit fell due to inflows for government month-end spending and liquidity tools used by the RBI to infuse cash into the system, dealers said.

Axis Bank was the largest issuer, raising INR 45 billion through one-year paper at a rate of 7.60%. PNB and HDFC Bank were the other issuers, raising INR 30 billion and INR 12 billion at a rate of 7.44% and 7.60%, respectively. 

Rates on three-month CDs were quoted at 7.45-7.50% on Tuesday, unchanged from Monday. Rates on three-month CP issued by manufacturing companies were at 7.52-7.57%, largely unchanged from Monday.

--Primary market

* Punjab National Bank, Axis Bank and HDFC Bank raised funds through CDs.

* Bharat Heavy Electricals, ICICI Securities, Motilal Oswal Financial Services, Cholamandalam, Julius Baer Capital, Aseem Infrastructure, L&T Finance, Tata Capital, Aditya Birla Finance Ltd, Cholamandalam Finance, Toyota Finance, Pilani Investments, Hero Fincorp and NABARD raised funds through CP.

--Secondary market

* Indian Bank's CD maturing on Feb. 5 was traded 4 times at a weighted average yield of 6.4105%.
* Reliance Retail Ventures Ltd's CP maturing on Mar. 24 was traded once at 7.2700%.

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 Akul Nishant Akhoury

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