Short-Term Debt:Rates up as MPC unexpectedly votes to keep rate unch


Short-Term Debt:Rates up as MPC unexpectedly votes to keep rate unch

Thursday, Dec 5


By Vishal Sangani


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MUMBAI – Rates on certificates of deposit and commercial papers rose today after Reserve of India’s Committee unanimously voted to keep the repo rate unchanged, against of a 25-basis point rate cut, dealers said.


In its policy statement, RBI noted that growth dynamics evolving currently prompted the rate-setting panel to leave the rate unchanged even though there was space for further rate action.


The RBI kept its policy stance unchanged and noted that its stance would remain accommodative for as long as necessary to revive growth.


Post RBI policy announcement, rates on three-month CPs were quoted 20-25 bps higher than on Wednesday as most participants had factored in at least 25-bps rate cut, a dealer said.


Rates on three-month CPs of manufacturing companies were quoted in a range of 5.30-5.45% as against 5.10-5.25% on Wednesday. For non-bank companies, the rates were quoted at 5.45-5.60% compared with 5.25-5.40% Wednesday.


Rates on three-month CDs were quoted in a range of 5.15-5.25% as against 5.00-5.10% previous close.


However, further rise in the rates of short-term debt papers were capped due to ample liquidity in the banking system, dealers said.


The liquidity has ballooned due to inflows on account of government towards salary and pension payments, and as the Reserve Bank of India may have been infusing rupees into the system through its dollar-buying interventions in the currency market.


Systemic liquidity is currently estimated at a surplus of 3.15 trln rupees.


On the issuances side, only Tata Power raised through commercial papers maturing in February at 5.56%, which was placed before the policy announcement.


So far today, CPs worth 5.00 bln rupees were issued, against 23.50 bln rupees on Wednesday.


Issuances of CPs on policy days are usually subdued because market participants remain on the sidelines to gauge the impact of the policy , dealers said.


Today, there was no issuance of certificates of deposit due to surplus liquidity in the banking system. On Wednesday, banks had raised 14 bln rupees through CDs.


–Secondary market

* Axis Bank’s CD maturing on Dec 13 was dealt six times at a weighted average yield of 5.1020%

* Indian Oil Corp’s CP maturing on Dec 16 was dealt at a weighted average yield of 5.2510%


Following was the volume at 1650 IST in the secondary market for short-term debt, in bln rupees, as detailed by the Clearing Corp of India’s F-TRAC :


Certificates of deposit

Commercial papers










NOTE: Details of the have been received from market sources




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


Edited by Mainak Moitra


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