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Informist, Tuesday, Feb. 18, 2025

By Sachi Pandey

MUMBAI – Funds raised through short-term debt papers plunged on Tuesday as borrowers stayed on the sidelines amid elevated rates, dealers said. "Only the issuers with requirements are coming to borrow money right now because the rates are very high and investors are not ready to settle for less," a dealer at a mid-sized mutual fund house said. 

On Tuesday, companies raised funds worth only INR 29.50 billion through commercial papers as compared to INR 102.75 billion raised on Monday. 

Rates on short-term debt instruments inched up by 5 basis points on Tuesday. "Investors are not lending, so to attract them issuers are offering 1-2 basis points higher every other day," a fixed-income dealer at a large-sized brokerage firm said.

Despite the rise in rates, the Small Industries Development Bank of India raised INR 11 billion through papers maturing in April at 7.30%. Market participants were surprised at the low coupon rate for the SIDBI paper. "This is not a market-level rate, this rate is on some special requirement from some corporate that had to take it for its portfolio. Otherwise, no one will give this kind of rate in the market right now," a dealer at a mid-sized brokerage firm said. 

On Monday, Reliance Retail Ventures Ltd. was the largest issuer of CP raising INR 65 billion through a three-month paper at a rate of 7.51%. 

Issuances through certificates of deposit also fell on Tuesday to a total of INR 18 billion compared with INR 37.50 billion on Monday. Bank of Baroda and Union Bank of India were the only CD issuers on Tuesday. 

On Tuesday, the rates on three-month CDs rose by 5 basis points to 7.45-7.50%. Rates on three-month CPs issued by manufacturing companies were around 7.60-7.70%. Rates on three-month CPs issued by non-banking financial companies were quoted at 7.78-7.88% as against 7.75-7.80% on Monday.

According to market participants, the rates are expected to remain elevated until the second week of March because of the tight liquidity situation. 

--Primary market

* Small Industries Development Bank of India, ONGC Petro Additions, ICICI Securities, Axis Securities, Julius Baer Capital, Aditya Birla Money, and Tata Motor Finance raised funds through CPs.

* Bank of Baroda and Union Bank of India raised funds through CDs.

--Secondary market

* Punjab National Bank's CD maturing on Thursday was traded 12 times at a weighted average yield of 6.3254%.

* Tata Motors Finance's CP maturing on Thursday was traded thrice at a weighted average yield of 6.3532%.

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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