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Informist, Wednesday, Feb. 4, 2026

 

By J. Navya Sruthi

      

MUMBAI – Yields on short-term debt instruments fell for the second straight day due to a hefty surplus of systemic liquidity, dealers said. The positive sentiment due to the trade deal between India and the US also weighed on yields, they added.

 

On Wednesday, yields on three-month certificates of deposit were at 6.98%, down from 7.05-7.10% Tuesday. Yields on one-year CDs were at 6.92%, slightly lower from 6.95% the previous day. Yields on six-month CDs were also down at 7.05-7.10% from 7.10-7.15% the previous day, dealers said. Yields on three-month CPs issued by non-banking financial companies were largely steady from the previous day at 7.45%. Yields on three-month commercial papers issued by manufacturing companies were nearly 10 basis points lower from the previous day at 7.15-7.20%, dealers said. 

 

The net liquidity absorbed from the banking system by the RBI – a proxy for the liquidity surplus – rose to INR 2.17 trillion Tuesday from INR 1.71 trillion Monday. The liquidity surplus increased as banks brought down their cash balances with the RBI and parked the funds under the Standing Deposit Facility, which shows up as net liquidity absorption, call market dealers said. The cash balances with the RBI fell to INR 7.66 trillion on Tuesday from INR 7.97 trillion the previous day. 

 

Late Monday, US President Donald Trump announced that the reciprocal tariff rate on India's exports to the US would now be 18% against the 25% imposed in early August. The US President said that Prime Minister Narendra Modi had agreed to replace India's Russian crude imports with oil from the US and potentially Venezuela. 

 

The positive sentiment around the trade deal and high liquidity surplus also boosted issuances in the primary market. The total CD issuances in the primary market on Wednesday rose to INR 205 billion from INR 141.50 billion Tuesday. Punjab National Bank raised funds through two CDs, INR 40 billion at 6.92% through one-year CD and INR 5 billion at 6.97% through three-month CD. Canara Bank raised INR 70 billion through three-month CD at 6.98%. Bank of Baroda raised INR 28 billion through one-year CD at 6.92% and HDFC Bank also issued one-year CD at 6.97% and raised INR 40 billion. Bank of India raised INR 22 billion at 7.07% through a three-month CD. 

 

Total CP issuances in the primary market were INR 80.5 billion Wednesday, down from INR 277.50 billion Tuesday. Bajaj Finance raised INR 15 billion through two CPs, and National Bank for Agriculture and Rural Development raised INR 25 billion at 7.06% through three-month CP. L&T Finance, Godrej Housing Finance, Bajaj Housing Finance, and ICICI Securities also issued CPs Wednesday. 

 

After taking cues from the US' trade deal with India, the market now awaits the Reserve Bank of India's Monetary Policy Committee's meeting outcome due Friday. Dealers expect the central bank to announce more measures to support the systemic liquidity, which will weigh on yields. A few dealers expect the central bank to conduct longer-tenure variable rate repo auctions and open market operations auctions. They also expect inflows from foreign investors to increase due to the announcement of the India-US and India-EU trade deals.   

 

Trading volume of CDs in the secondary market was INR 172.75 billion Wednesday, down from INR 177.45 billion Tuesday. Trading volume of CPs was INR 63.25 billion, significantly higher than INR 33.70 billion Tuesday. 

 

--Primary market

* Punjab National Bank, Bank of Baroda, Bank of India, Canara Bank, and HDFC Bank raised funds through CDs

* Bajaj Housing Finance, NABARD, Godrej Housing Finance, Bajaj Housing Finance, Bajaj Finance, L&T Finance, ICICI Securities, Motilal Oswal Financial Securities Ltd., Kotak Securities, and Cholamandalam Finance raised funds through CPs.

 

--Secondary market

* NABARD's CD maturing Thursday was traded eight times at a weighted average yield of 4.8221%

* Birla Group Holdings' CP maturing Thursday, was traded once at a weighted average yield of 4.8917%

 

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:

 

Certificates of deposit		Commercial paper
Wednesday	Tuesday	Wednesday	Tuesday
172.75	177.45	63.25	33.70

 

End

 

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

 

Edited by Tanima Banerjee

 

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