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Informist, Friday, Aug. 29, 2025

By Vidhushi RajPurohit and Shravani Chandiwade

MUMBAI – Rates in the short-term debt market settled steady Friday after rising slightly during the day, dealers said. There was a slight uptick in borrowing rates on account of the month-end redemption needs of mutual funds, which are primary investors in the market, they said. The Reserve Bank of India's six-day variable rate reverse repo auction for INR 1.50 trillion also caused the overnight money market rates to inch higher Friday, the impact of which was felt in short-term debt market rates as well.

"Rates rose intially in early hours, but then the market settled and the companies who were trying to raise funds were able to issue their papers," a dealer at a broking firm said.

The poor demand at the primary auction of INR 320.00 billion of government securities Friday also exerted some upward pressure on short-term debt market rates, dealers said. The cut-offs on both the 6.92%, 2040 bond and the 6.90%, 2065 bond were much lower than estimated in an Informist poll. The RBI set a cut-off price of INR 97.38 for the 2040 gilt at auction, sharply down from the poll estimate of INR 97.55. For the 2065 gilt, the central bank set the cut-off price at INR 93.87, also lower than the estimate of INR 93.97.

"Rates did not change much, but with high cut-off (yields) in G-sec (government securities) and as the central bank held a VRRR auction of six days, rates for issuers in the CD (certificates of deposit) market did rise by 2-3 basis points," a dealer at a state-owned bank said. Indicative rates for three-month paper remained at 5.77-5.80%, unchanged from Thursday. Rates for six-month CD remained at 6.05-6.16% and those for one-year paper were at 6.30-6.35%, they said.

Activity in the secondary market dipped sharply owing to reduced buying appetite from participants, dealers said. Some participants also refrained from trading actively ahead of the weekend, while others were waiting for the release of India's GDP data for Apr-Jun, they said.

India's GDP growth rose to a five-quarter high of 7.8% in Apr-Jun, data released by the statistics ministry Friday showed. The growth data was sharply higher than the market's expectation, which dampened traders' hope for a policy rate cut by the RBI's Monetary Policy Committee in 2025, dealers said. An Informist Poll of 17 economists had seen GDP growth in the June quarter at 6.7%.

"With such a high growth figure, it looks like there will not be a rate cut till December now," a dealer at a private-sector bank said. "Borrowing rates can move up in this (short-term debt) market in September due to the quarter end, but unless there is some infusion in the liquidity front, the market will not see any major rally for now."

Meanwhile, big-ticket issuances led to a surge in the total quantum of primary issuances Friday. Total fundraising via commercial paper climbed to INR 29.25 billion, from INR 19.00 billion Thursday. Motilal Oswal Financial Services Ltd. was the top CP issuer and mopped up INR 13.00 billion by issuing three-month paper at 6.64%. The other major issuer was Kotak Securities, which raised INR 8.50 billion through three-month paper at 6.43%.

CD issuances also remained high. Three banks tapped the market to raise a cumulative INR 45.00 billion, compared with INR 50.00 billion raised Thursday. Indian Bank raised INR 20.00 billion through a three-month paper at 5.79%. The other big issuer was Bank of Baroda, which borrowed INR 15.00 billion by issuing a three-month paper at 5.80%.

--Primary market

* Kotak Securities, Godrej Industries, Motilal Oswal Financial Services, and Cholamandalam Investment and Finance raised funds through CP

* Bank of Baroda, Indian Bank, and Punjab & Sind Bank raised funds through CD

--Secondary market

* Canara Bank's CD maturing Monday was traded thrice at a weighted average yield of 5.6267%.

* Aditya Birla Money's CP maturing Monday was traded twice at a weighted average yield of 5.6967%. 

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 Rajeev Pai

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