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Wednesday, September 28, 2022

Short-Term Debt: Rates down as rate hike on expected lines, CRR unch

Informist, Wednesday, Jun 8, 2022


By Vishal Sangani


MUMBAI – Rates on short-term debt papers such as commercial papers and certificates of deposit fell today as the Reserve Bank of India’s monetary policy statement was seen on expected lines, dealers said.


The Monetary Policy Committee of the central bank raised the policy repo rate by 50 basis points to 4.90%.


According to an Informist poll, 28 of 30 respondents expected the RBI to raise the repo rate by 30-50 basis points.


Rates on three-month CPs of non-bank finance companies fell to 5.30-5.60% from 5.60-5.90% on Tuesday, and those on papers of manufacturing companies were down at 5.15-5.40% compared with 5.35-5.60% on the pervious day.


Rates on three-month CDs were down at 5.05-5.25% as against 5.25-5.45% on Tuesday.


Rates were up on Tuesday as a few market players braced themselves for more than 50 bps hike, but since the rate hike was in line with what was expected, the rates eased back to Monday’s levels, said a dealer with a financial institution.


“Money market rates had a relief rally as no aggressive posturing was seen from the MPC statement,” said Avnish Jain, head of fixed income at Canara Robeco Asset Management Co.


“Short-term yields dropped by 10-12 bps. The governor reiterated that the tightening would be calibrated, and liquidity will remain adequate. With 90 bps upfronting of rate hikes, future rate hikes may be smaller, and that is seen as positive by the markets. In the short term, market sentiment may remain positive,” Jain said.


Rates also fell as the RBI did not raise the cash reserve ratio maintained by banks and the central bank ensured adequate liquidity, dealers said.


“Going ahead, while normalising the pandemic related extraordinary liquidity accommodation over a multi-year time frame, the RBI will ensure availability of adequate liquidity to meet the productive requirements of the economy,” said RBI Governor Shaktikanta Das said in a statement.


CP issuances rose sharply in the primary market as the policy announcement was on expected lines, dealers said.


Companies tapped the market to roll over papers set to mature in the coming days and to meet their funding requirements.


So far today, CPs aggregating 74.00 bln rupees were issued, as against 1.00 bln rupees on Tuesday. Reliance Retail Ventures raised 35.00 bln rupees through papers maturing in three-month at 5.30% and was the biggest issuer.


Indian Bank was the lone issuer of CDs. It raised 13.75 bln rupees at 4.90% through papers maturing on Aug 8. The state-owned lender tapped the market to meet its funding requirements, dealers said.


–Primary market

* National Bank for Agriculture and Rural Development, Aditya Birla Finance, Axis Securities, HDFC Securities, ICICI Securities, Aditya Birla Housing Finance, Birla Group Holdings, Reliance Retail Ventures and Godrej Industries raised funds through CPs.


–Secondary market

* Canara Bank’s CD maturing on Thursday was dealt four times at a weighted average yield of 4.6407%

* L&T Finance’s CP maturing on Sep 5 was dealt three times at a weighted average yield of 5.3116%


At 1530 IST, the following were the volumes–in bln rupees–in the secondary market for short-term debt, 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 Ashish Shirke


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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