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Informist, Thursday, Apr. 3, 2025

By Siddhi Chauhan

MUMBAI – Issuances in the short-term debt market rose sharply on Thursday as borrowing rates cooled off. Rates on three-month commercial papers of non-banking finance companies were down 20 basis points from Wednesday at 6.85-7.05%, dealers said. Rates on CPs issued by manufacturing companies also fell by 20 bps to 6.65-6.85%. Rates on three-month certificates of deposits issued by banks were 15 bps lower at 6.60-6.80%.

Rates in both CP and CD segments fell due to continued improvement in liquidity conditions and expectations that the Reserve Bank of India's Monetary Policy Committee will soften its tone next week, dealers said. On Wednesday, the central bank absorbed INR 1.93 trillion of liquidity on a net basis, the most in four-and-a-half months. The improvement in liquidity conditions is a result of the RBI's continued infusion of durable liquidity and larger-than-usual month-end spending by the government, dealers said.

On Thursday, INR 96.25 billion was raised via CPs, up from INR 84.75 billion on Wednesday, while INR 35.00 billion of CDs were issued late in the day after a barren Wednesday. Banks that had stayed on the sidelines due to elevated borrowing costs earlier this week in the three-month segment tapped the CD market on Thursday.

"Yesterday (Wednesday), many issuers were preferring June maturity instead of three-month paper because they felt that rates on three-month paper were still high. That is the reason why no CDs were issued by banks as well," a dealer at a brokerage firm said. "However, if you see today, Bank of Baroda has issued at a very fine level, indicating a fall in three-month segment. Soon, issuances will pick up again."

HDFC Bank was the largest CD issuer on Thursday. It raised INR 25.00 billion through a three-month paper at 6.60%. Bank of Baroda raised INR 10.00 billion through a similar CD, also at 6.60%.

In the CP segment, Hindustan Petroleum Corp. Ltd. was the largest issuer on Thursday, raising INR 40.00 billion through a paper maturing in June at 6.53%. Small Industries Development Bank of India raised INR 35.00 billion through a three-month paper at 6.63%. "We have a seen a huge fall in rates in both CP and CD segment. This has prompted many issuers to raise funds," a dealer at a brokerage fund said. "They must be doing so due to rollover demand."

Borrowing costs may fall even further in the coming days, especially if the RBI's MPC cuts interest rates next week and loosens its policy stance further to 'accommodative' from 'neutral'. The rate-setting panel is widely expected to lower the repo rate by 25 bps on Wednesday.

--Primary market

* HPCL, Godrej Consumer Products, Aditya Birla Housing, Network18 Media & Investments, Kotak Securities, L&T Finance, and SIDBI raised funds through CPs.

* Bank of Baroda and HDFC Bank raised funds through CDs.

--Secondary market

* HDFC Bank's CD maturing on Jun. 10 was traded twice at a weighted average yield of 6.3337%.

* National Bank for Agriculture and Rural Development's CP maturing on May 6 was traded thrice at a weighted average yield of 6.3727%

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 Ashish Shirke

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