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Informist, Monday, Jun. 30, 2025

By Vidhushi RajPurohit

MUMBAI – Elevated borrowing rates kept most issuers on the sidelines in the short-term debt market Monday, dealers said. Quarter-end redemption needs refrained mutual funds from actively investing in the debt instrument, which resulted in higher borrowing rates, they said. 

Borrowing costs on the three-month CPs issued by non-banking financial companies were at 6.25-6.45% Monday, unchanged from Friday after rising from Thursday's rate of 6.18-6.38%, while indicative rates on three-month paper issued by manufacturing companies were at 5.92-6.12% Monday. The rates on the three-month certificates of deposit issued by banks were at 5.90-6.10%. 

"Rates rose on Friday and as it is both quarter- and month-end they are still high," a dealer at a private sector bank said. "We can see some ease in rates from later this week and then issuances could also pick up slightly."

On Monday, only three companies tapped the short-term debt market to raise INR 14.5 billion through commercial papers. Bajaj Financial Securities was the largest CP issuer as it raised INR 7.5 billion through a three-month paper at 6.30%. 

No certificates of deposit were issued by banks due to ample liquidity in the banking system, dealers said. Banks also remained on the sidelines as they had already met their rollover needs earlier in the month, they said. 

"Around the start of the month, rates had fallen and at that time most banks had actively raised funds," a dealer at another private sector bank said. "Now liquidity is also quite comfortable, so that is also leading to lack of issuances." On Sunday, RBI's net absorbed liquidity was at INR 2.62 trillion, slightly higher than INR 2.59 trillion Saturday. As per the latest RBI data, funds parked under the Standing Deposit Facility was at INR 1.54 trillion Sunday, slightly up from INR 1.51 trillion Saturday. 

Contrary to the dearth of activity in the primary market, trading volume picked up in the secondary market as mutual funds rushed to liquidate the papers to meet their redemption needs, dealers said. The turnover in the secondary CD market rose to INR 47.85 billion from INR 39.85 billion Friday. For the CP market, the volume in the secondary market was at INR 21.75 billion, up from INR 6.75 billion Friday.  

-Primary market

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

* No banks raised funds through CDs.

--Secondary market

* HDFC Bank's CD maturing Tuesday was traded four times at a weighted average yield of 5.5488%.

* Small Industries Development Bank of India's CP maturing Wednesday was traded once at a weighted average yield of 5.9000%.

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

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Deepshikha Bhardwaj

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