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Short-Term Debt: Rates up tracking rise in overnight lending rates

Informist, Wednesday, Jan 19, 2022


By Vishal Sangani


MUMBAI – Rates on short-term debt papers such as certificate of deposits and commercial papers surged today tracking overnight money market where lending rates have rise, dealers said.


Rates on the interbank call money rates and tripartite repo surged today because of firm demand for funds from banks due to a decline in the amount of overnight fixed rate reverse repo and also as banks have parked excess fund in the seven-day variable rate reverse repo auction, dealers said.


On Tuesday, the RBI had conducted a seven-day variable rate reverse repo auction, which saw banks park the entire notified amount of 2.0 trln rupees as against the maturity amount of 1.75 trln rupees.


Market participants said banks borrowed excess fund from tripartite repo to park in a seven-day variable rate reverse repo auction. Banks have been increasingly playing the arbitrage between the overnight market and the RBI’s reverse repos at which they earn returns of up to 3.99%.


Tracking overnight money market, cutoff yields at the auction today for the 91-, 182-, and 364-day Treasury-bills were also set 12, 10, and 9 bps higher than those set by the central bank at the previous auction on Jan 12. The cutoff for 91-day T-bill was set at 3.69%, that for 182-day at 4.12%, and 364-day at 4.47%.


Usually, short-term debt papers are issued at a premium over the yield of treasury bills.


Rates on three-month CPs of manufacturing companies were at 3.80-4.05% as against 3.75-4.00% on Tuesday, while those on papers of non-bank finance companies were up 4.20-4.35% compared with 4.05-4.25% on Tuesday.


Rates on three-month CDs rose to 3.70-3.90% as against 3.65-3.85% on Tuesday.


Rates on short-term debt papers also rose as surplus liquidity in the banking system is expected to narrow in the coming days due to outflow on account of goods and services tax payments.


Liquidity in the banking system is estimated to be in a surplus of over 6.34 trln rupees.


Due to surge in rates, participation was low today as companies remained on the sidelines because of elevated rates.


So far today, CPs aggregating 6.50 bln rupees were issued, as against 61.00 bln rupees sold on Tuesday.


Issuances of CPs also fell today because most companies remained on the sidelines as there was no immediate need for funds, and also due to lack of big-ticket issuances.


–Primary market

* Tata Projects, ICICI Securities Primary Dealership and Hindustan Petroleum Corp raised funds through CPs.


–Secondary market

* HDFC Bank’s CD maturing on Dec 13 was dealt three times at a weighted average yield of 4.5450%

* Indian Oil Corp’s CP maturing on Jan 24 was dealt four times at a weighted average yield of 3.7976%


Following are the 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:


Certificates of deposit

Commercial papers






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




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


Edited by Maheswaran Parameswaran


Cogencis news is now Informist. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.


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Source: Cogencis

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