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Informist, Wednesday, Dec. 24, 2025

By Vaishali Tyagi

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

Borrowing costs on the three-month CPs issued by non-banking financial companies were at 6.50-6.60% Wednesday, unchanged from Tuesday, while indicative rates on three-month paper issued by manufacturing companies were at 6.05-6.15% Wednesday. 

Fundraising through commercial papers remained lower, dealers said. On Wednesday, only two companies tapped the short-term debt market to raise INR 4.25 billion through commercial papers compared with no CP issuance on Tuesday. Most companies stayed on the sidelines, expecting rates to fall in the near term. Bharat Heavy Electricals was the largest CP issuer as it raised INR 3.5 billion through a three-month paper at 6.30%. Another company was Godrej Industries which raised INR 750 million through 6-month CP at 6.50%.

"Corporates are getting better rates from bank lines, therefore they are borrowing funds from there; therefore, CP issuances are not that high and some investors are also demanding higher returns which also added to lower CP issuances," a dealer at a brokerage firm said. 

Primary market borrowing through CDs remained broadly steady at INR 46.50 billion from INR 46 billion Tuesday but overall it remained subdued. Union Bank was the largest issuer. The state-owned bank raised INR 30 billion through CD maturing in three-month at 6.03%. Another state-owned lender, Punjab National Bank raised INR 6 billion through three-month CD at 6.03%. Indian Overseas Bank borrowed INR 5 billion through three-month CD at 6.20%. Canara Bank tapped the market to raise INR 5.50 billion through CD maturing in five months at 6.34%

Indicative rates on three-month CDs were at 6.03-6.07% Wednesday, unchanged from Tuesday. Rates on six-month and one-year CDs were 6.40-6.47% and 6.60–6.67%, respectively. Banks and other issuers are tapping the market in low volume due to high borrowing costs, dealer said. Despite some issuers needing to roll over their debt, overall supply remains low. Mutual funds are holding back investments due to tight liquidity, expecting higher returns, but issuers are not willing to accept current high rates.

Similar to the primary market, volume in the secondary market also remained low. The turnover in the secondary CD market was INR 55.40 billion against INR 109.15 billion Tuesday. For the CP market, the volume in the secondary market was at INR 23.40 billion, up from INR 34.25 billion Tuesday. 

--Primary market

* Bharat Heavy Electricals, Godrej Industries raised through CPs

* Union Bank, Canara Bank, Indian Overseas Bank, Punjab National Bank raised funds through CDs

--Secondary market

* Canara Bank's CD maturing Friday was traded four times at a weighted average yield of 5.3634%

* Larsen and Toubro's CP maturing Friday was traded twice at a weighted average yield of 5.4584%

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 Akul Nishant Akhoury

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