Informist, Wednesday, Sep 29, 2021

By Vishal Sangani

MUMBAI – Issuances of commercial papers rose today because of fundraising by state-owned companies such as Indian Oil Corp, Chennai Petroleum Corp, Bharat Oman Refineries, Bharat Petroleum Corp, Hindustan Petroleum Corp and NTPC.

These companies tapped the market to roll over papers that were set to mature in the coming days and to meet fresh funding requirements.

So far today, CPs aggregating 67.60 bln rupees were issued, as against 48.00 bln rupees on Tuesday. Bharat Petroleum Corp was the major issuer, raising 20.00 bln rupees through papers maturing on Oct 28 at 3.47%.

The supply of papers by big-ticket issuers was readily absorbed because of their low-risk profile.

The supply of CPs by non-banking finance companies were subdued because demand from mutual funds was low, dealers said.

Fund houses have parked funds in ultra short-term CPs of non-banking finance companies. They are also holding back investments to maintain liquidity to invest in such issuances in the coming days.
 
Fund houses typically invest in such papers of companies as they offer better yields in a shorter period.
 
Rates on CPs of manufacturing companies rose because the Reserve Bank of India set a higher-than-expected cutoff at its seven-day variable rate reverse repo operation on Tuesday, dealers said.

The central bank had tendered 2 trln rupees under its seven-day variable rate reverse repo operation.

With the RBI setting the cutoff at 3.99%--closer to repo rate of 4%--some traders believed that the central bank may have hinted towards higher short-term rates ahead of the eventual hike in the reverse repo rate, dealers said. The cutoff was aggressive as it was sharply above the weighted average rate of 3.61%.

The move prompted dealers to demand a high yield at the Treasury bill auction as well. The cutoff yields set by the RBI on the 91-day, 182-day and the 364-day T-bills were 11, 15 and 21 basis points higher, respectively, from the previous week's cutoffs.

Rates on three-month CPs of manufacturing companies increased by 10 bps to 3.55-3.70%, and those on papers of non-bank finance companies were unchanged at 3.85-4.05%.

Banks did not issue any certificates of deposit today as there was no immediate need for funds owing high surplus liquidity in the banking system and low credit growth.

On Tuesday, IndusInd Bank, the lone issuer, had raised 5 bln rupees through CDs.

Usually, issuances of CDs surge at the end of a quarter as banks borrow funds to meet their requirement and to disburse short-term loans to shore up their balance sheets.

Liquidity in the banking system is estimated to be in a surplus of about 7.43 trln rupees as against 7.20 trln rupees on Tuesday.

The liquidity surplus is expected to widen in the coming days because of month-end spending by the government in the form of salary and pension payments.

Loan growth remained muted due to lack of demand for big-ticket loans from corporates and as banks remained cautious in anticipation of rising asset quality stress due to the COVID-19 pandemic.

Rates on three-month CDs were quoted at 3.40-3.55%, in the secondary market.

--Primary market

* Indian Oil Corp, Chennai Petroleum Corp, Bharat Oman Refineries, Bharat Petroleum Corp, Hindustan Petroleum Corp and NTPC raised funds through CPs.

--Secondary market

* IDFC First Bank's CD maturing on Dec 20 was dealt at a weighted average yield of 3.4798%

* Reliance Industries' CP maturing on Oct 26 was dealt four times at a weighted average yield of 3.4995%

Following are volumes at 1530 IST in the secondary market for short-term debt, in bln rupees, as detailed by the Clearing Corp of India's F-TRAC platform:

NOTE: Details of the deals have been received from market sources.

End

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

Edited by Aditya Sakorkar

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