Informist, Friday, Dec 31, 2021
By Vishal Sangani
MUMBAI – Large issuances by Indian Oil Corp led to a spike in funds raised through commercial papers today.
A few companies also tapped the market to roll over papers that were set to mature in the coming days and to meet fresh requirements for funds.
So far today, CPs aggregating 69.00 bln rupees were issued, as against 16.00 bln rupees sold on Thursday. Indian Oil Corp raised 52.0 bln rupees in total through papers maturing on Jan 17 and Jan 24.
The supply of papers by big-ticket issuers was readily absorbed because of their low risk profile.
Demand from mutual funds was steady as they were witnessing steady inflows through liquid funds, which they are deploying in such papers. They are also reinvesting the funds received from the maturity of short-term papers.
Despite surge in issuances, rates on short-term debt papers were unchanged because of prevailing surplus liquidity in the banking system, dealers said.
Rates on three-month CPs of manufacturing companies were quoted at 3.80-4.00%, while those on papers of non-bank finance companies were unchanged at 4.20-4.40%.
Rates on three-month CDs were quoted at 3.70-3.90%.
Liquidity in the banking system is estimated to be in a surplus of over 6.99 trln rupees, as against 6.68 trln rupees on Thursday. The liquidity surplus is expected to widen more in the coming days because of month-end spending by the government in the form of salary and pension payments.
On the other hand, HDFC Bank was the lone issuer of certificates of deposit today, dealers said. The private bank raised 10 bln rupees through papers maturing on May 24 to meet its quarter-end funding need.
Fundraising by banks is usually high towards the end of each quarter to meet the quarter-end requirements and boost balance sheets.
The RBI today conducted a 14-day variable rate reverse repo auction for notified amount of 7.50 trln rupees, which saw banks park 2.67 trln rupees as against the maturity of 3.13 trln rupees.
So far, the RBI has drained 5.84 trln rupees through multiple variable rate reverse repo auctions.
Informist today exclusively reported, quoting a banking source, that the Reserve Bank of India wants almost 7.6 trln rupees of excess liquidity in the system to be parked at the 14-day variable rate reverse repo auctions in January, and move the market away from parking funds at the overnight reverse repo window, which is a standing facility.
“The RBI has already stated its intent on prominence for the 14-day VRRR as its key liquidity instrument. The transition will not be disruptive but the shift of excess liquidity to VRRR is the plan,” the source said.
On Dec 8, at the post-policy press meet, RBI Governor Shaktikanta Das said the variable rate reverse repo auction route will be the preferred approach to tackle excess liquidity, with 14-day reverse repo as the main instrument in line with the liquidity management framework released in February 2020.
Das added that this does not mean doing away with the overnight fixed rate repo, and where needed RBI will conduct fine-tuning operations for liquidity through other shorter- and longer-term reverse repo auctions.
–Primary market
* Sundaram Home Finance, Tata Capital Housing Finance, Indian Oil Corp, Hindustan Petroleum Corp raised funds through CPs.
–Secondary market
* Axis Bank’s CD maturing on Jan 28 was dealt five times at a weighted average yield of 3.5352%
* Export Import Bank of India’s CP maturing on Mar 30 was dealt at a weighted average yield of 3.6999%
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 Maheswaran Parameswaran
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Source: Cogencis
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