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Short-Term Debt:CP, CD rates up 15 bps as surplus liquidity contracts

Informist, Tuesday, Sep 20, 2022

 

By Vishal Sangani

 

MUMBAI – Rates on short-term debt papers such as commercial papers and certificates of deposit increased by 15 basis points as surplus liquidity in the banking system shrank, dealers said.

 

Liquidity in the banking system is currently estimated to be in a surplus of over 2.95 bln rupees as against 229.14 bln rupees on Monday.

 

The surplus liquidity narrowed to the lowest level since May 2019 due to outflows of advance tax payment for Jul-Sep and payments for government bonds that were auctioned on Friday.

 

Rates on three-month commercial papers of non-banking finance companies increased to 6.45-6.60% as against at 6.30-6.45% on Monday and those on papers of manufacturing companies were up by 15 bps to 6.25-6.45%.

 

Rates on three-month certificates of deposit rose to 6.15-6.40% compared with 6.00-6.25% on Monday.

 

Liquidity could go into a deficit in the coming days due to outflows on account of goods and services tax payments. Liquidity was last seen in a deficit in May 2019.

 

Rates on short-term debt papers are expected to rise in the coming days due to a decline in surplus liquidity in the banking system and a likely rate hike of 35 bps by Reserve Bank of India in September policy review.

 

Meanwhile, Canara Bank was the lone issuer of certificates of deposits today, raising 26.00 bln rupees in total at 6.12% through papers maturing on Dec 19 and Dec 21. The state-owned lender tapped the market for its funding needs and also as surplus liquidity in the banking system contracted, dealers said.

 

On Monday, Indian Bank was the lone issuer and raised 2.00 bln rupees through certificates of deposit.

 

Market participants said supply of certificates of deposit may increase in the coming days as banks will raise funds due to a pick-up in credit demand and for quarter-end funding requirements.

 

Typically, fundraising by banks rises towards the end of every quarter to meet quarter-end requirements and boost balance sheets.

 

Fundraising through commercial papers declined today because of lower market participation amid a low requirement for funds.

 

So far today, commercial papers aggregating 13.75 bln rupees were issued, as against 26.50 bln rupees on Monday. Aditya Birla Finance was the major issuer, raising 13 bln rupees through papers maturing in three months at 6.45%.

 

Capital raising by some companies was also low due to a surge in rates, dealers said.

 

Rates on short-term debt papers are 30-35 bps higher in primary market since last week.

 

–Primary market

* Aditya Birla Finance and Godrej Industries raised funds through commercial papers.

 

–Secondary market

* Punjab National Bank’s certificates of deposit maturing on Oct 3 were dealt four times a weighted average yield of 6.1860%

* Hindustan Petroleum Corp’s commercial papers maturing on Sep 23 were dealt six times at a weighted average yield of 6.2447%

 

At 1530 IST, 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

Today

Previous

Today

Previous

33.0525.8055.0047.65

 

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 Deepshikha Bhardwaj

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. 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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© Informist Media Pvt. Ltd. 2022. All rights reserved.

 

Source: Cogencis

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