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Informist, Friday, Aug. 21, 2026

 

By Meera Nair

 

MUMBAI – Rates on certificates of deposit rose sharply in the three-month segment Friday as hawkish comments from the US Federal Reserve revived concerns about the pace of global rate hikes, while surplus liquidity in the banking system and limited issuance kept activity subdued, dealers said. There were no CD issuances during the day, while trading in commercial papers remained lacklustre for the second consecutive session, they said.

 

Yields on three-month CDs rose 10 basis points from the previous session to 6.60-6.65%, while six-month CD rates were unchanged at 6.90-6.95%. One-year CD yields were around 7.40%, dealers said.

 

"The yields rose after the Federal Reserve minutes supported a potential interest rate hike if inflation doesn't come down... this has impacted the market and so the rates," a dealer from a brokerage firm said. The three-month segment remained the most active despite the recent rise in yields, while supply from public-sector undertakings remained limited, the dealer said.

 

In the one-year segment, there were few potential issuers apart from Small Industries Development Bank of India, which has traditionally been active in this tenor, a dealer from a public-sector bank said. Banks are also unlikely to step up CD issuances in the near term as they can meet funding requirements through swaps and overseas borrowings, while surplus domestic liquidity continues to provide support, the dealer said.

 

"From my understanding, there won't be many issuances in the market till Sept. 11 as banks will use funds through swaps and other overseas funding and currently liquidity is also there... so it won't be that much of an issue till the 11th," the dealer said.

 

However, the funding environment could tighten later as credit growth picks up, potentially prompting banks to return to the CD market more actively, the dealer said. "We think we will be tighter liquidity-wise because of credit uptick. If there's an uptick in credit, then issuing CDs is the only option for banks," the dealer said.

 

Three-month yields on AAA-rated non-bank financiers were at 7.10-7.15%, while six-month yields were at 7.40-7.45% and one-year yields were at 7.65-7.70%.

 

The CP market remained subdued as volatility and weak sentiment discouraged investors from taking fresh positions, with only a few deals taking place, the brokerage dealer said. "Compared to CDs, the CP market is not that active due to the current volatility and sentiment not being great... only a few deals are happening," the dealer said. 

 

Secondary-market turnover in CDs fell to INR 88.05 billion Thursday from INR 97.40 billion Wednesday, according to Clearing Corp of India Ltd data. There were no CD issuances during the day.

 

Secondary-market turnover in commercial papers also declined to INR 29.65 billion from INR 65.95 billion a day earlier. However, CP issuances rose to INR 63.51 billion as of 1750 IST from INR 39.20 billion Thursday, indicating that primary-market borrowing remained relatively active despite subdued secondary-market trading.

 

HDFC Securities, Motilal Oswal Financial Services, PNB Housing Finance, Axis Securities, Birla Group Holdings, Tata Capital, and UltraTech Cement were among the issuers. HDFC Securities raised INR 7 billion through 91-day CPs at a weighted average yield of 7.23%, while Motilal Oswal Financial Services raised INR 4.25 billion at 7.35%. PNB Housing Finance raised INR 4 billion at a weighted average yield of 6.75%, while Axis Securities and Birla Group Holdings raised INR 3.5 billion each at weighted average yields of 7.26% and 7.06%, respectively.

 

Meanwhile, market participants are monitoring US buybacks to assess their potential impact on short-term funding instruments, particularly amid the recent repricing in the money markets.

 

Participants are also assessing which part of the yield curve offers better entry opportunities after short-term rates rose around 25-30 basis points following the Reserve Bank of India's decision to advance the closure of the FCNR(B) deposit mobilisation window, a market participant said.

 

The net liquidity absorbed by the RBI, a proxy for surplus liquidity in the banking system, fell to INR 3.50 trillion Thursday from INR 3.71 trillion Wednesday. The decline was smaller than the around INR 700 billion in goods and services tax-related outflows during the day, suggesting that banks may have received offsetting inflows, including through foreign currency non-resident (bank) deposits, dealers said.

 

--Primary market 

* There were no CD issuances Friday. 

* HDFC Securities, Motilal Oswal Financial Services, PNB Housing Finance, Axis Securities, Birla Group Holdings, Tata Capital, and Ultratech Cement issued CPs on Friday.

 

--Secondary market

* Bank of Baroda's CD maturing Monday was traded 10 times at a weighted average yield of 5.15%.
* Pilani Investments and Industries' CP maturing Tuesday was traded once at a weighted average yield of 6.06%.

 

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 papers
Friday	Thursday	Friday	Thursday
88.05	97.40	29.65	65.95

 

End

 

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

 

Edited by Saji George Titus

 

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