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Informist, Monday, May 26, 2025

By Sachi Pandey 

MUMBAI – Yields on short-term debt instruments fell at the start of the week, aided by the surplus liquidity and expectations of a rate cut at the Reserve Bank of India's June policy, dealers said. Rates on three-month commercial papers by non-banking finance companies Monday fell 10 basis points to 6.50–6.70% from 6.60–6.80% on Friday. CPs issued by manufacturing companies also fell by 10 bps to 6.45–6.65%. Certificates of deposit saw a similar fall, with three-month papers quoted at 6.12–6.32% compared to 6.22–6.42% on Friday.

"Rates have eased more for short-term papers as the June MPC (monetary policy committee meeting) is near and the market is expecting another rate cut," a dealer at a private sector bank said. "In one or two days, there can be some tightness in rates because MFs will have redemption pressure, but since it's May and not quarter-end, rates will not spike as much."

The Reserve Bank of India's announcement of a surplus transfer of INR 2.69 trillion to the government after market hours on Friday added to the softness in rates. Though the pay-out was slightly below market expectations of INR 3.00 trillion, dealers said its impact on money market rates will be seen gradually.

Fundraising activity in the short-term debt market also picked up with issuers tapping the market amid surplus liquidity. CP issuances jumped to INR 19.25 billion on Monday, rebounding from a brief lull on Friday when it fell to INR 10.25 billion. "Companies are deploying funds and investors want to lock in rates now, knowing they may fall further," a dealer at a large brokerage firm said. "Friday was slow because everyone was waiting for the RBI's announcement (on dividend transfer)."

Muthoot Finance and Motilal Oswal Financial Services led the CP market on Monday, each raising INR 5 billion through three-month papers. Muthoot Finance priced its CP at 6.68% while Motilal Oswal raised at 6.70%. On Friday, Aditya Birla Housing Finance raised INR 5 billion through a three-month paper.

CD issuances from banks also surged. Banks raised INR 44 billion on Monday, up sharply from INR 10 billion on Friday. Bank of Baroda led the pack with a INR 15 billion issuance of three-month CDs at 6.15%, followed by Canara Bank with INR 14 billion at the same rate and tenor. On Friday, only Punjab National Bank tapped the market with a three-month paper raising INR 10 billion at 6.18%.

The systemic liquidity rose to INR 1.70 trillion Friday, up from INR 991.23 billion Thursday. Going forward, dealers expect liquidity to rise with the government's month-end spending, possibly lifting the surplus to INR 2.7 trillion by May-end.

--Primary market

* Tata Projects, Axis Securities, Kotak Securities, HDFC Securities, Muthoot Finance and Motilal Oswal Financial Services raised funds through CPs.

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

--Secondary market

* HDFC Bank's CD maturing Tuesday was traded 11 times at a weighted average yield of 5.8675%.

* Export Import Bank of India's CP maturing Tuesday was traded eight times at a weighted average yield of 5.9664%.

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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