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Informist, Wednesday, Jun. 25, 2025

By Siddhi Chauhan

MUMBAI – Borrowing through short-term debt instruments plunged Wednesday as investors sought higher rates after the Reserve Bank of India announced that it will conduct a variable rate reverse repo auction on Friday, dealers said. Quarter-end needs also pressed investors to seek higher rates, they said. Demand from most issuers was also muted due to high issuances earlier in the month, dealers said. 

Commercial papers worth only INR 8.50 billion were raised Wednesday, down from INR 20.50 billion on Tuesday, while no funds were raised through certificates of deposit on Wednesday, against INR 124 billion Tuesday. 

Post market hours on Tuesday, the RBI announced that it will conduct a seven-day variable rate reverse repo auction on Friday for INR 1 trillion. The RBI announcement pushed up short-term rates. The weighted average call rate rose to 5.29% Wednesday from 5.27% Tuesday, while the weighted average tri-party repo rate rose to 5.25% from 5.20% on Tuesday. Treasury bill cut-off yields at the auction on Wednesday were 5-8 basis points higher than the previous week's auction. The RBI set the cut-off on the 91-day T-bill at 5.41%, for the 182-day T-bill at 5.54% and the 364-day T-bill at 5.57% on Jun. 18. Consequently, the rates on the three-month short-term debt papers in the secondary market also rose around 5 bps, dealers said. 

"While in the secondary market we saw a rise in rates, the primary market didn't see any major activity," a dealer at a brokerage firm said. "Issuers who want to raise funds are waiting for the rates to cool down, but I don't see any chances of a cool-off after the VRRR auction." 

Borrowing costs of CDs issued by banks were unchanged from Tuesday's close of 5.85-6.05%. Rates on three-month paper issued by non-banking financial companies were unchanged from Tuesday's close of 6.18-6.38%, while indicative rates on three-month paper issued by manufacturing companies were also similar to Tuesday's close of 5.87-6.07%. 

Issuers who needed funds but were getting higher rates in the short-term debt market preferred other avenues to fulfil their demand, dealers said. "RIL (Reliance Industries) and Sundaram Finance were looking to raise funds today, but because of high rates, they didn't tap the (CP) market," a dealer at another brokerage firm said. "They are borrowing from banks instead as they find that cheaper."

-Primary market

* Bajaj Finance, ICICI Securities and Redington raised funds through CPs.

* No funds were raised through CDs.

--Secondary market

* Bank of India's CD maturing Thursday was traded once at a weighted average yield of 5.2933%.

* Kotak Mahindra Investment's CP maturing Thursday was traded once at a weighted average yield of 5.2993%.

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

Edited by Saji George Titus

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