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Informist, Wednesday, May 14, 2025

By Siddhi Chauhan 

MUMBAI – Short-term debt issuances rose sharply Wednesday as borrowing rates cooled off, dealers said. Borrowing through commercial papers rose sharply to INR 56.00 billion from INR 16.75 billion Tuesday. Borrowing through certificates of deposit increased to INR 75 billion from INR 59 billion Tuesday.

Indicative rates on the three-month CP issued by non-banking financial companies fell by 7 basis points to 6.70-6.90% Wednesday. Indicative rates on the three-month CP issued by manufacturing companies fell by 5 bps to 6.55-6.75%. Rates on the three-month papers issued by banks fell by 2 bps to 6.50-6.70%.

Market participants cited varied reasons for the fall in borrowing costs in the primary market. Some attributed this to a delayed impact of easing in tension between India and Pakistan. Others said the impact of ceasefire between India and Pakistan was limited to the secondary market. On Tuesday, rates in CP, CD markets cooled off by around 5 basis points. On Saturday, both countries agreed to a full and immediate ceasefire. Some traders were of the view that inflows received by mutual funds led the rates to ease. A few completely refuted the market chatter, attributing the lower-than-expected cut-off yields at the Treasury bill auction Wednesday as the reason.

"There was hardly an impact of the ease in geopolitical situation in the primary market," a dealer at a brokerage firm said. "I think the fall in rates was because of good cut-off at T-bill (Treasury-bill) auction. After the result, issuers quoted rates with respect to the lower cut-offs."

At the Treasury bill auction held Wednesday, the bidding was aggressive for all the tenures, dealers said. Only one bidder got stock of the 91-day T-bill at the cut-off rate of 5.84%, 3 bps lower than estimated in an Informist poll. The cut-offs for the 182-day and the 364-day T-bills were also 3 and 4 bps lower than the poll estimates, respectively. For the 364-day T-bill as well, only two bidders got the entire stock. This happened as the headline CPI inflation data, which fell to a 69-month low, strengthened hopes of a cut in the Reserve Bank of India's repo rate in June.

On Wednesday, Cholamandalam Finance Ltd. was the largest CP issuer. It raised INR 10 billion through a one-year paper at 7.32% followed by Sundaram Finance Ltd. which raised INR 9.5 billion through a three-month paper at 6.74%. On Tuesday Cholamandalam Investment and Finance was the largest issuer, raising INR 8 billion through a six-month paper at 7.32%.

The sudden cool-off in rates also prompted banks to tap the short-term debt market, dealers said. Last week, despite rollover needs, banks tapped other avenues than CD market due to elevated rates.

"Rates have gone back to where they were before the conflict (between India and Pakistan). Now the rates might stay here," a dealer at a private sector bank said. "After the dividend (payment by RBI to the government) there could be more ease." Traders expect the central bank's surplus transfer to the government for 2024-25 (Apr-Mar) to be INR 2.5 trillion to INR 3.5 trillion, higher than INR 2.11 trillion transferred last year.

On Wednesday, Axis Bank was the largest CD issuer. It raised INR 25 billion through a three-month paper at 6.50%. Punjab National Bank raised INR 20 billion through a three-month paper at 6.50%.

In the remaining two days of the week, CD worth INR 171.05 billion are set to mature, of which Punjab National Bank's CD worth INR 19.65 billion are set to mature on Friday, as per data compiled by Informist. Axis Bank's CD worth INR 19.50 billion are also set to mature the same day.

--Primary market

* Bajaj Housing Finance, Network 18, Sundaram Finance, Aditya Birla Capital, Julius Baer Capital, Aditya Birla Money, Tata Capital, Cholamandalam Finance, ICICI Securities, and Bajaj Finance Securities raised funds through CPs.

* Punjab National Bank, Indian Bank, Punjab and Sind Bank, and Axis Bank raised funds through CD.

--Secondary market

* Bank of Baroda's CD maturing Thursday was traded six times at a weighted average yield of 5.8078%.

* Bajaj Financial Securities' CP maturing Thursday was traded once at a weighted average yield of 5.8409%.

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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