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Informist, Wednesday, Jul. 9, 2025

By Vidhushi RajPurohit

MUMBAI – Primary issuances of short-term debt remained low Wednesday amid low funding needs at the beginning of the quarter and high liquidity surplus, dealers said. However, the auction of a two-day variable rate reverse repo by the Reserve Bank of India drove up the borrowing costs, which led to increased buying interest in the secondary market for certificates of deposits, dealers said.

In the primary market, only two companies issued commercial papers worth INR 5 billion, down from INR 12.35 billion Tuesday. Axis Securities raised INR 4.25 billion through a paper maturing in October-end at 6.37%.

Banks did not tap the short-term debt market Wednesday, citing low funding needs. "There were no quotes today (Wednesday), from any bank," a dealer at a private sector bank said. "This month, only those banks who need to roll over their papers are active and liquidity is so high who will want to borrow more."

The RBI Wednesday conducted a two-day variable rate reverse repo auction for INR 1 trillion and accepted all offers worth INR 973.15 billion. The auction was in line with expectations as systemic liquidity has been above INR 3 trillion in July, dealers said. On Tuesday, the RBI net absorbed INR 3.07 trillion of liquidity from the banking system, down from INR 3.44 trillion Monday, central bank data showed. 

The central bank announced the auction post-market hours Tuesday, and it resulted in some frenzy in early trade, which pushed up the money market rates, dealers said. At 1700 IST, the weighted average rate for the call money market was at 5.32%, up from 5.26% at close Tuesday. The weighted average triparty repo rates were also up at 5.29%, from 5.13% on the previous day. 

The secondary market's weighted average yield for the most traded CD of Punjab National Bank was 5.3490% Wednesday, up from 5.2202% on Tuesday for the most traded paper of Bank of Baroda. The rise in the rates prompted some banks to buy papers in the secondary market, which drove up the CD turnover. The total traded volumes of CDs in the secondary market were INR 52.20 billion Wednesday, more than double that of INR 24.95 billion Tuesday.

"Rates rose because VRRR (variable rate reverse repo auction) was there. It did not rise that much and liquidity is still there, but it gave some interest to trade in the market," a dealer at a state-owned bank said. 

On the other hand, low selling interest from fund houses led to low volumes on the CP side, dealers said. The total trades in commercial paper in the secondary market were at INR 19.00 billion, sharply down from INR 46.00 billion Tuesday. 

--Primary market

* Godrej Industries and Axis Securities raised funds through CPs.

* No banks raised funds through CDs.

--Secondary market

* Punjab National Bank's CD maturing Thursday was traded seven times at a weighted average yield of 5.3490%.

* Tata Capital's CP maturing Thursday was traded once at a weighted average yield of 5.4028%.

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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