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Informist, Friday, Jul. 4, 2025

By Vidhushi RajPurohit

MUMBAI – Primary market issuances of short-term debt instruments came to a standstill on Friday as issuers refrained from borrowing ahead of the weekend, dealers said. Low funding needs and the huge surplus liquidity in the banking system also contributed to the fall in issuances, they said. There were also fears that the Reserve Bank of India's variable rate reverse repo auction would push up market rates, they said.
 

"There were some fears that the RBI's VRRR auction could push up rates and everyone was gauging the market," a dealer at a mutual fund said. "Issuers in general also avoid borrowing now because the maturity for three-month papers falls in October, which will be the start of a new quarter."   

The RBI net absorbed INR 4.04 trillion from the banking system on Thursday, the highest since May 19, 2022, central bank data showed. The rise in liquidity was largely due to the central government's salary and pension payouts, which are estimated to have resulted in inflows of around INR 1.75 trillion to INR 2 trillion into the banking system, dealers said.

On Friday, the RBI conducted a seven-day variable rate reverse repo auction for INR 1 trillion. The central bank received offers worth INR 1.71 trillion, which led some market participants to fear that the central bank could announce another auction during the day, which, in turn, could push up borrowing rates, dealers said. 

However, amidst muted activity, borrowing rates remained largely unchanged from the previous day's levels, dealers said. Indicative rates on three-month paper issued by manufacturing companies were unchanged from Thursday's 5.90-5.95%. For certificates of deposit, the rates for three-month issuances also remained at the same level at 5.79-5.85%.

"Friday, usually, issuances are also low because of the weekend and this time there are enough funds in the system, so that is also a reason," a dealer at a brokerage firm said. 

Meanwhile, the absence of issuances pushed investors to actively trade in the secondary market, with market volumes remaining at elevated levels. The total certificates-of-deposit turnover in the secondary market was INR 71.35 billion, compared to INR 73.85 billion Thursday. The total trades in the secondary market for commercial paper rose slightly to INR 48.20 billion from INR 46.40 billion the previous day.

--Primary market

* No companies raised funds through CPs.

* No banks raised funds through CD.

--Secondary market

* Punjab National Bank's CD maturing Jul. 10 was traded eight times at a weighted average yield of 5.4312%.

* Reliance Retail Ventures' CP maturing Jul. 7 was traded thrice at a weighted average yield of 5.2211%.

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 Saji George Titus

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