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Informist, Tuesday, Apr. 8, 2025

By Siddhi Chauhan

MUMBAI – Issuances in the short-term debt market rose sharply on Tuesday ahead of the outcome of Reserve Bank of India's Monetary Policy Committee meeting, dealers said. On Tuesday, fundraising through commercial papers was at INR 159.00 billion, sharply higher from INR 17.50 billion on Monday. After a dry day on Monday, banks issued certificates of deposit worth around INR 42.50 billion on Tuesday.

As per market participants, the rate-setting panel is widely expected to cut the repo rate by 25 basis points on Wednesday. Some market participants also expect a change in stance from 'neutral' to 'accommodative' along with additional liquidity measures by the RBI, dealers said. While chances of a rate cut has been completely discounted, a fear still dwells in the minds of market players; "What if MPC doesn't give any additional liquidity measures?" 

"Market is quite certain on the chances of rate cut by RBI, but if there are no additional liquidity measures then the yield (on short-term papers) will rise," a dealer at a state-owned bank. "This fear has led many issuers to raise funds today (Tuesday) itself." On Monday, the net liquidity absorbed by the RBI was INR 1.41 trillion, slightly lower than INR 1.61 trillion on Sunday, as per RBI data.

In the February policy meeting, the rate-setting committee cut the repo rate by 25 bps but did not announce any fresh measures to add liquidity at a time when the banking system was in a large deficit. It had also retained its policy stance at 'neutral'. That resulted in borrowing costs of three-month CD to rise by 6 bps on the next day.

On Tuesday, Bank of Baroda was the top issuer, raising INR 17.50 billion collectively through two CDs maturing in three months and six months at 6.53% and 6.85%, respectively. Indian Bank also raised INR 15.00 billion through a three-month CD at 6.55%.

A similar sentiment drove issuances in the CP market, resulting in many issuers to tap the short-term debt market aggressively, dealers said. National Thermal Power Corp. was the top issuer raising INR 50.00 billion through three-month paper at 7.57%, followed by Reliance Jio Infocomm raising INR 26.00 billion through a near three-month CP at 6.50%. Its parent Reliance Industries also raised funds through a CP maturing in the end of June at 6.47%. Bharat Heavy Electricals Ltd. tapped the CP market for the second straight day, raising INR 10.00 billion at 6.69% through an end-June paper.

A slight cool-off in borrowing costs also prompted issuers to raise funds, dealers said. The rates on the three-month paper issued by banks fell to 6.53-6.73% on Tuesday from 6.55-6.75% on Monday. Meanwhile, rates on the three-month paper issued by non-banking financial companies also fell by 10 bps on Tuesday to 6.55-6.75%, while those issued by non-banking finance companies also saw a similar fall with the rates closing at 6.65-6.85%. 

--Primary market

* Bharat Heavy Electricals Ltd., National Thermal Power Corp, Small Industries Development Bank of India, Indian Oil Corp., Reliance Jio Infcomm, Reliance Industries, Tata Capital Housing, Network18 Media & Investments and Aditya Birla Housing Financ raised funds through CPs.

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

--Secondary market

* Bank of Baroda's CD maturing on Apr. 17 was traded once at a weighted average yield of 6.2999%.

* HDFC Securities' CP maturing on Apr. 16 was traded once at a weighted average yield of 6.7991%.

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 Akul Nishant Akhoury

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