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Informist, Thursday, Feb. 20, 2025

By Siddhi Chauhan

MUMBAI – Borrowing through commercial papers and certificates of deposit rose on Thursday as issuers tapped the short-term debt market aggressively due to rollover demand, dealers said. On Thursday, CPs worth INR 117.25 billion were raised against INR 29.50 billion on Tuesday and CDs worth INR 64.00 billion were mopped up against INR 18 billion on the previous working day. Money markets were shut on Wednesday for Chhatrapati Shivaji Maharaj Jayanti.

"Rollover demand is the only reason why we are seeing such high issuances today (Thursday). Other than that no issuer would prefer to borrow at a higher rate," a dealer at a brokerage firm said. "This is the only reason why banks have also borrowed heavily today." In the week ending Friday, CPs worth INR 400.85 billion and 

certificates of deposits worth INR 271.80 billion are set to mature, as per data compiled by Informist Media. 

On Thursday, Union Bank was the largest CD issuer raising INR 40 billion through three-month and one-year papers at 7.46% and 7.60% respectively. Bank of Baroda raised INR 4 billion through a paper maturing in September at 7.60% and Canara Bank raised INR 20 billion through one year CD at 7.57%. On Tuesday, Bank of Baroda and Union Bank of India were the only CD issuers, raising a total of INR 18 billion. 

In the CP market, National Bank for Agriculture and Rural Development was the largest issuer raising INR 54 billion through a three-month paper at 7.50%. Bajaj Finance raised INR 26 billion through a three-month paper at 7.77%. On Tuesday, Small Industries Development Bank of India had raised INR 11 billion through papers maturing in April at 7.30%.

On Thursday, the rates on three-month CDs were unchanged at 7.45-7.65%. Rates on three-month CPs issued by manufacturing companies were around 7.51-7.71%. Rates on three-month CPs issued by non-banking financial companies were quoted at 7.77-7.98%.

According to market participants, the rates are expected to remain high until the second week of March because of the tight liquidity conditions and high rollover demand. On Wednesday, the net liquidity injected by the RBI--a proxy for the systemic liquidity deficit—was ay INR 1.77 trillion against INR 1.67 trillion on Tuesday.

The liquidity deficit is expected to widen further due to outflows for goods and services tax, which will drain out INR 1.5 trillion to INR 1.7 trillion over the next few days, dealers said. Out of this, INR 600 billion to INR 800 billion is already expected to have left the system on Thursday, dealers said.

--Primary market

* ICICI Securities, National Bank for Agriculture and Rural Development, Reliance Jio Infocom, Tata Capital Housing Finance, Axis Finance, Bajaj Finance Ltd, IGH Holding, Aditya Birla Money, and Kotak Mahindra Prime Ltd raised funds through CPs.

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

--Secondary market

* Indian Bank's CD maturing on Friday was traded thrice at a weighted average yield of 6.4403%.

* NABARD's CP maturing on Friday was traded 14 times at a weighted average yield of 6.4180%.

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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