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Informist, Wednesday, Aug. 12, 2026

 

By Meera Nair

 

MUMBAI – Rates on certificates of deposit rose by 5 basis points across key tenors on Wednesday due to a temporary demand-supply mismatch, despite comfortable systemic liquidity, dealers said. Activity in the commercial paper market improved as issuers stepped up borrowing ahead of the Consumer Price Index data, they said.

 

Three-month certificate of deposit yields were quoted at 6.35-6.40%, up 5 basis points from 6.30-6.35% on Tuesday, while six-month yields rose 5 bps to 6.70-6.75% from 6.65-6.70%. The one-year segment was dealt at 7.20%.

 

Dealers said the rise in CD yields was largely a temporary market adjustment rather than a sign of tightening liquidity conditions. The market is primarily driven by the balance between demand and supply, and such short-term movements in rates have occurred previously, they said. "The current rise in levels is not something to worry about. The glitch in the levels despite a comfortable position is common and has happened before also. It will ease in the coming days," a dealer from a private-sector bank said.

 

Dealers expect CD yields to remain under some upward pressure next week due to the anticipated goods and services tax-related liquidity outflow, although stronger mutual fund inflows could offset the move. "Next week I think the levels can go up by 5-10 bps and can be at 6.45-6.50% levels due to the GST outflow, but if mutual funds get enough flows by next week, then it can again go down," the dealer from the private-sector bank said.

 

The net liquidity absorbed by the Reserve Bank of India, a proxy for the banking system's liquidity surplus, rose to INR 3.35 trillion on Tuesday from INR 3.19 trillion on Monday. Banks converted inflows from foreign currency non-resident (banks) deposits into rupee liquidity, which supported the liquidity surplus, dealers said. However, the RBI's regular dollar sales in the spot market over the past two weeks limited the increase in the systemic surplus, they said.

 

Trading activity was concentrated mainly in the three-month segment, where banks were able to secure comparatively attractive levels, the dealer said. Higher-tenor CDs were monitored more closely only when levels in the three-month segment were not favourable.

 

"In the morning, the level in the three-month segment was around 6.35%, while later it was at 6.40-6.42% levels and around closing it came to 6.35-6.40% levels," the dealer said.

 

Secondary market turnover in CDs fell sharply to INR 124.90 billion from INR 221.40 billion on Tuesday, according to Clearing Corp. of India Ltd. data. Primary market CD issuances also declined sharply to INR 5 billion from INR 79.75 billion a day earlier, with City Union Bank being the only issuer. City Union Bank raised INR 5 billion through a 91-day CD at a weighted average yield of 7.25%.

"September, JFM (January-February-March), and one-year segments have seen the most activity. Dealers mostly prefer the JFM segment as they are getting good levels there," a dealer from a brokerage said.

 

In the commercial paper market, secondary market turnover rose to INR 90.45 billion, up from INR 53.20 billion on Tuesday. Fresh issuances, however, declined slightly to INR 95.90 billion as of 1713 IST from INR 100.04 billion a day earlier.

 

National Bank for Agriculture and Rural Development raised INR 17.00 billion through commercial paper maturing on Nov 11 at a weighted average yield of 6.65%, while Axis Securities, JM Financial Credit Solutions, Tata Capital, and Cholamandalam Investment and Finance Co. raised INR 5 billion each at 7.00%, 7.70%, 6.75%, and 6.90%, respectively. HDFC Securities raised INR 4 billion through 91-day paper at a weighted average yield of 6.88%.

 

Three-month AAA-rated commercial papers issued by non-banking finance companies were quoted at around 6.75-6.80%, while six-month papers were at 7.05-7.10% and one-year papers at 7.45-7.50%.

--Primary market 

* City Union Bank was the only CD issuer Wednesday.

* NABARD, Axis Securities, JM Financial Credit Solutions, Tata Capital, and HDFC Securities were among CP issuers Wednesday.

 

--Secondary market

* Punjab and Sind Bank's CD maturing Thursday was traded once at a weighted average yield of 5.15%.
* Bajaj Finance's CP maturing Thursday was traded five times at a weighted average yield of 5.17%.

 

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
Wednesday	Tuesday	Wednesday	Tuesday
124.90	221.40	90.45	100.04

 

End

 

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

 

Edited by Saji George Titus

 

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