Short-Term Debt
CD yields ease despite low liquidity on Mutual Funds buying
This story was originally published at 18:34 IST on 16 July 2026
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By Meera Nair
MUMBAI – Yields on certificates of deposit fell by 5-10 basis points across key tenors Thursday as mutual funds stepped up purchases after receiving fresh inflows from corporations, offsetting the impact of tighter liquidity in the banking system, dealers said.
Three-month AAA-rated certificates of deposit were quoted at 6.80-6.85%, down 10 basis points from 6.90-6.95% Wednesday. Six-month yields eased 5 bps to 7.00-7.05% and one-year yields also fell 5 bps to 7.30-7.35%. Dealers said trading activity was concentrated in August maturities and paper maturing in February and March.
"Even though yields have fallen by 5-10 basis points across tenors, rates remain elevated, particularly in the three-month segment, because market sentiment is still weak amid escalating global tensions," a dealer at a broking firm said. "The market is slightly better than yesterday but it is too early to say conditions have normalised."
Three-month AAA-rated commercial paper issued by non-banking finance companies was quoted at 7.20-7.25% while six-month paper was at 7.40-7.45% and one-year paper at 7.60-7.65%.
Primary issuance of commercial paper increased to INR 34.30 billion as of 1709 IST from INR 24.35 billion Wednesday. The major issuers were Kotak Mahindra Investments Ltd., ICICI Home Finance Co. Ltd., Godrej Properties Ltd., Julius Baer Capital India Pvt. Ltd., and Navi Finserv Ltd. Kotak Mahindra Investments raised INR 12 billion through seven-day commercial paper at a weighted average yield of 6.85%. ICICI Home Finance raised INR 2.5 billion through 70-day paper at 6.70%. Julius Baer Capital and Godrej Properties raised INR 1.5 billion each at weighted average yields of 7.25% and 6.99%, respectively.
Primary CD issuance zoomed to INR 111.50 billion as of 1730 IST from INR 4.50 billion Wednesday, driven by fundraising by Punjab National Bank, HDFC Bank, and Canara Bank. Punjab National Bank raised INR 43.50 billion through 28-day CD at a weighted average yield of 6.25%. HDFC Bank raised INR 60.75 billion through two issuances at 6.85?ch. Canara Bank raised INR 7.25 billion through two issuances at a weighted average yield of 6.80?ch, according to data from Clearing Corp. of India Ltd.
"Global uncertainty is expected to remain elevated, and we believe yields could rise further next week," the dealer quoted earlier said. "The improvement in market sentiment encouraged issuers to tap the CD market, resulting in a sharp increase in primary issuances," another dealer at a broking firm added.
Secondary market turnover in CD rose to INR 110.20 billion from INR 72.00 billion Wednesday, according to CCIL data. Commercial paper turnover increased to INR 39.00 billion from INR 17.45 billion.
The Reserve Bank of India's net liquidity absorption--an indication of surplus liquidity in the banking system--fell sharply to INR 1.31 billion Wednesday from INR 1.49 trillion a day earlier, indicating that the surplus had narrowed substantially.
--Primary market
* Punjab National Bank, HDFC Bank, and Canara Bank were the only CD issuers Thursday.
* Kotak Mahindra Investments, ICICI Home Finance Co. Ltd., Godrej Properties Ltd., Julius Baer Capital India Pvt. Ltd., Navi Finserv Ltd., were among the CP issuers.
--Secondary market
* Punjab National Bank's CD maturing Friday was traded twice at a weighted average yield of 5.15%
* NTPC Ltd.'s CP maturing Friday was traded six times at a weighted average yield of 5.32%
The following were the volumes, in INR billion, in the secondary market for short-term debt at 1700 IST, as detailed on CCIL's F-TRAC platform:
|
Certificates of deposit |
Commercial paper |
||
| Thursday | Wednesday |
Thursday |
Wednesday |
| 110.20 | 72.00 | 39.00 |
17.45 |
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Rajeev Pai
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