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Informist, Tuesday, Mar. 11, 2025

By Siddhi Chauhan

MUMBAI – Short-term debt issuances tumbled on Tuesday as issuers had borrowed heavily on Monday, dealers said. A slight rise in three-month short-term debt rates due to redemption pressures also weighed on borrowing via certificates of deposits and commercial papers, dealers said. 

Despite high maturities, many banks remained on the sidelines as some had met their demand on Monday as rates were expected to rise in the coming days, dealers said. On Tuesday, HDFC Bank was the sole issuer of CDs, raising just INR 6.50 billion through one-year paper at 7.63%. This was sharply down from INR 76.50 billion raised on Monday, of which Canara Bank was the largest issuer, borrowing INR 33.00 billion through a one-year paper at 7.59%.

A slight rise in rates also kept banks on the sidelines, dealers said. On Tuesday, rates on three-month CDs rose to 7.57-7.67% from 7.55-7.65% on Monday. "The rates are still high, so issuers are a bit hesitant. But overall, the issuances are high and will pick up in the upcoming weeks as there are large maturities," a dealer at a mutual fund said. "Liquidity is also expected to remain tight this month, and mutual funds will also be under redemption pressure in the last weeks of the year, so rates might also move up."

According to data from the Reserve Bank of India, the net liquidity injected by the central bank--a proxy for systemic liquidity conditions--was at INR 1.45 trillion on Monday, the same as on Sunday. The liquidity deficit remained unchanged as there were no significant inflows or outflows on Monday, dealers said. However, going forward, banking system liquidity is expected to be under pressure due to outflows of corporate advance tax, which will likely start from Wednesday, dealers said. These outflows are expected to drain a total of INR 2.00 trillion to INR 2.50 trillion over three days. 

This will exert pressure on short-term borrowing costs, which are already high due to heavy maturities this month. CDs worth INR 1.64 trillion are due for redemption in March, as against INR 1.36 trillion in February. Similarly, CPs worth INR 2.04 trillion are maturing this month, up from INR 1.33 trillion in February.

On the CP segment side, companies raised INR 20.85 billion on Tuesday as against INR 162.25 billion on Monday. The sharp fall in issuances was due to a demand-supply mismatch as issuers wanted to raise funds at lower rates while investors wanted to lock in higher rates, dealers said. 

On Tuesday, Bajaj Finance was the largest issuer, raising INR 15.00 billion through a three-month paper at 7.85%. On Monday, the National Bank for Agriculture and Rural Development was the biggest CP issuer, raising INR 82.50 billion through a three-month paper at 7.65%. Export-Import Bank of India raised INR 25.00 billion on Monday, also through a three-month paper, at 7.59%.

Rates on three-month CPs of non-banking finance companies were at 7.85-8.05%. Rates on CPs issued by manufacturing companies rose to 7.65-7.85% on Tuesday from 7.60-7.80% on the previous day. 

--Primary market

* HDFC Bank raised funds via CDs.

* Bajaj Finance, Tata Housing Development and Tata Realty and Infrastructure Ltd raised funds via CPs.

--Secondary market

* HDFC Bank's CD maturing on Wednesday was traded 14 times at a weighted average yield of 6.4238%.

* National Bank for Agriculture and Rural Development's CP maturing on Wednesday was traded 12 times at a weighted average yield of 6.4439%.

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 Saji George Titus

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