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Informist, Wednesday, Feb. 5, 2025

By Siddhi Chauhan

MUMBAI – After two consecutive days of heavy borrowing, short-term debt issuances saw a cool off on Wednesday as corporate borrowers had already met their near-term funding needs, dealers said. Some issuers put off their fundraising in anticipation of a cut in policy rates by the Reserve Bank of India's Monetary Policy Committee at its meeting which ends Friday, dealers said.

In addition to a 25-basis-point rate cut by the rate-setting panel, some traders expect a continuation of measures to improve liquidity conditions. 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. 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.

Expectation of easier financial conditions dragged down rates on the three-month certificates of deposit by 5 bps to 6.38-6.43% on Wednesday. The rates on three-month commercial papers issued by manufacturing companies also fell by around 5 basis points to 7.50-7.55%, while those issued by non-banking finance companies were 7.65-7.70%. 

"Issuers are holding back because they know that rates will fall even further in the coming days if rate cut happens," a dealer at a brokerage firm said. "Only the people who are in dire need of funds are raising right now."

A total of INR 43.50 billion was raised through CPs against INR 77 billion Tuesday. Meanwhile, fundraising through certificates of deposit fell to INR 50 billion against INR 87 billion on Tuesday.

On Wednesday, Export and Import Bank and L&T Finance were the largest issuer of CP, raising INR 25 billion each. While the Export and Import Bank issued a three-month paper at a rate of 7.41%, L&T Finance borrowed through one-month paper at a rate of 7.49%. 

On Tuesday, the net liquidity injected by the RBI fell to the lowest level since Jan. 5. Net liquidity injected--a proxy for systemic liquidity deficit--was at INR 382.16 billion on Tuesday against INR 1.08 trillion on Monday. The deficit narrowed due to the settlement of dollar/rupee buy/sell swap which was conducted by RBI on Friday, dealers said.

"These issuances had nothing to do with the day-to-day requirements, they were issued ahead of upcoming maturity," a dealer at a state-owned bank said. "Fall in deficit had nothing to do with this."  On Wednesday, Canara Bank and IDBI Bank were the largest issuers of CD, raising INR 20 billion each through three-months paper at a cut-off rate of 6.41% and 6.525 respectively. 

--Primary market

* Punjab National Bank, Indian Bank, Canara Bank, IDBI Bank and HDFC Bank raised funds through CDs.

* ICICI Securities, Motilal Oswal Financial Services, L&T Finance, EXIM and Godrej Industries,aised funds through CP.

--Secondary market

* Punjab Bank's CD maturing on Feb. 6 was traded five times at a weighted average yield of 6.3599%.
* Sikka Ports and Terminals Ltd's CP maturing on Feb. 6 was traded five times at 6.3521%.

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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