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Informist, Friday, Jul. 31, 2026

By J. Navya Sruthi

MUMBAI – Yields on certificates of deposit and commercial paper were unchanged Friday as demand from banks and comfortable systemic liquidity offset the selling pressure from mutual funds, dealers said. They expects yields to soften by mid-August and September as they expect systemic liquidity and durable liquidity to increase due to inflows throgh foreign currency non-resident (bank) deposits.

Yields on "AAA"-rated three-month CD were steady from the previous day at 6.85-6.90% Friday, dealers said. Yields on six-month and indicative yields one-year "AAA"-rated CD were unchanged at 6.90-6.95% and 7.15-7.20%, respectively. Yields on "AAA"-rated non-banking finance companies' three-month CP were unchanged from Thursday at 7.20-7.25%, dealers said.

The RBI's net liquidity absorbed--an indication of the systemic liquidity surplus--was INR 1.30 trillion Thursday, up from INR 1.16 trillion Wednesday due to some inflows from government month-end spending, dealers said.

CD turnover rose to INR 56.75 billion as of 1830 IST Friday from INR 21.00 billion Thursday, according to data from Clearing Corp. of India Ltd. HDFC Bank Ltd. was the sole fundraiser Friday and raised INR 11.50 billion through two CD issuances. Thursday, banks had raised INR 36.45 billion. CD issuances were down Friday, which is usual on the last day of the month, dealers said.

Dealers said banks were buying paper maturing in up to 30 days to support their liquidity coverage ratio while mutual funds were selling these paper and buying 91-day to 364-day paper.

Meanwhile, issuance of commercial paper rose to INR 28.50 billion as of 1830 IST from INR 24.30 billion Thursday. CP turnover fell to INR 19.25 billion at 1830 IST from INR 23.00 billion Thursday. Dealers attributed the fall in volume in the secondary market to higher issuances in the primary market. 

Going forward, market participants will take cues from the RBI's Monetary Policy Committee decision due Wednesday and track the central bank's data on inflows through FCNR(B) deposits. They expect these flows to pull down yields on short-term debt paper by 10-15 basis points by September.

Most participants expect more than $50 billion inflows through FCNR(B) deposits. Some expect the systemic liquidity to rise to INR 2.5 trillion to INR 2.8 trillion in August.

--Primary market 

* HDFC Bank raised funds through CD Friday

* HDB Financial, L&T Finance, Kotak Securities, and Axis Finance raised funds through CP Friday.

--Secondary market

* Indian Bank's CD maturing Aug. 10 was traded once at a weighted average yield of 6.3291%.
* National Bank for Financing Infrastructure and Development's CP maturing Tuesday was traded twice at a weighted average yield of 5.6976%.

The following were the volumes, in INR billion, in the secondary market for short-term debt at 1830 IST, as detailed on CCIL'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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