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Informist, Friday, Sept. 11, 2026

 

By Vaishali Tyagi

 

MUMBAI/NEW DELHI – Yields on short-term debt instruments rose Friday as traders avoided taking large positions due to low risk appetite on fears of further escalation in the war in West Asia, dealers said. "Market sentiment is weak, people are not sure about how the situation will unfold going ahead, especially over the extended weekend...crude prices have risen drastically and remained above $100 per barrel, which added to the weak sentiment," a dealer at a private bank said. Dealers said traders avoided taking positions due to the extended weekend, as Indian financial markets will remain shut on Monday for Ganesh Chaturthi.

 

Dealers said apart from global factors, domestic factors also contributed to the rise in yields. Expectations of a rate hike by the RBI's Monetary Policy Committee in October have increased due to the rise in crude oil prices and US Treasury yields along with rising global yields. Further, traders also assessed comments from the Reserve Bank of India Governor Sanjay Malhotra that the central bank may conduct open market sales of government securities or dollar-rupee sell-buy swaps to absorb surplus liquidity driven by strong foreign currency non-resident (banks) deposits.

 

After market hours, the Reserve Bank of India announced open market operation sale auctions of government bonds for an aggregate amount of INR 1 trillion in three tranches of INR 500 billion, INR 250 billion, and INR 250 billion, to be held on Thursday, Sept. 21 and Sept. 28.

 

"Issuers are awaiting clarity and have put their fundraising plans via CDs on hold as they are unable to gauge the situation...some issuers are expecting to raise capital and lock in funds now, but investors are playing on rate hike expectations and want to lock in higher-yielding papers," a dealer at a brokerage firm said. "At the same time, issuers are thinking that if liquidity tightens after the RBI's open market operation, it will push rates down."

 

Yields on CD rose by 5-10 basis points across maturities. "AAA"-rated three-month CD yields rose to 6.00-6.05% Friday from 5.85-5.95% Thursday. Yields on six-month CD were at 6.50-6.60%, higher from 6.55% Thursday, while yields on one-year CD were at 7.05%, up from 7.00% in the previous session. 

 

The supply of certificates of deposit fell significantly with only a single issuance on Friday, owing to high surplus liquidity in the banking system, dealers said. Continued redemption pressure on mutual funds, the major investors in this segment, kept them away from primary market participation. The RBI's net liquidity absorbed – a proxy for the banking system liquidity surplus – was INR 10.43 trillion Thursday, little changed from INR 10.50 trillion Wednesday. Issuance by Qatar National Bank was the sole CD in primary market Friday, down from INR 30 billion Thursday, according to data from Clearing Corp. of India Ltd. The bank raised INR 2 billion through 122-day CD at a weighted average rate of 6.85%. 

 

In the commercial paper market, yields moved in tandem with CD yields and consequently rose by similar levels across maturities. Yields on "AAA"-rated three-month CP issued by non-banking financial companies were at 6.70-6.75%, higher from 6.50-6.60% Thursday. Yields on six-month CP were at 7.05-7.10%, up marginally from 7.00% Thursday, while yields on one-year CP were at 7.50-7.55% from 7.30-7.45%. In the CP market, primary issuances continued to rise due to rollover requirements of non-banking financial companies, manufacturing companies, and broking firms, dealers said. Primary issuances were INR 303.91 billion, up from INR 196.70 billion Thursday, according to CCIL data. 

 

Reliance Retail Ventures borrowed INR 45 billion through 77-day CP at a weighted average yield of 5.97%, while Reliance Industries raised INR 31.75 billion via 91-day CP at a yield of 5.99%. State-owned entity National Bank for Agriculture and Rural Development issued 91-day CP to raise INR 33.75 billion. Other key issuers included Tata Steel, ICICI Home Finance Co., HDFC Securities, Titan Co., Godrej Finance, and Hindustan Petroleum Corp. 

 

In the secondary market, CD market volume was at INR 103.50 billion Friday, down from INR 115.80 billion Thursday, while the CP market volume fell to INR 39.60 billion from INR 113.60 billion.

 

Going ahead, dealers expect liquidity to tighten and short-term debt issuances to rise, as issuers will look to meet their quarter-end requirements and anticipate a pickup in credit offtake, which will deplete liquidity.

 

--Primary market

* Qatar National Bank was the CD issuer.

* Reliance Retail Ventures, Reliance Industries, NABARD, Tata Steel, ICICI Home Finance Co., HDFC Securities, Titan Co., Godrej Finance, and Hindustan Petroleum Corp. were among key CP issuers.  

 

--Secondary market

* ICICI Bank's CD maturing Tuesday was traded seven times at a weighted average yield of 4.85%.
* Export-Import Bank of India's CP maturing Tuesday was traded five times at a weighted average yield of 4.83%.

 

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
Friday	Thursday	Friday	Thursday
103.50	115.80	39.60	113.60

 

End

 

Edited by Deepshikha Bhardwaj

 

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