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Friday, December 1, 2023

Short-Term Debt: CP issuances down amid liquidity deficit

Informist, Friday, Sep 22, 2023


By Asmita Patil

MUMBAI – Fundraising through commercial papers fell today amid liquidity deficit in the banking system, dealers said. Godrej & Boyce became the sole issuer of CPs today, raising 2 bln rupees through papers maturing in three months at 7.10% rate. 


On Thursday, Small Industries Development Bank of India had raised 22.50 bln rupees through papers maturing in three months at a coupon of 7.15%.


At the end of trade on Thursday, liquidity in the system was estimated to be in a deficit of 1.48 trln rupees, the highest level since April 2019. On Wednesday, liquidity was in a 1.12-trln-rupee deficit.


“Mutual funds are facing quarter-end redemption pressure and liquidity is also tight, so issuers would rather wait for a week,” a dealer with a mid-sized brokerage firm said. 


Mutual funds may face redemption pressure in their liquid schemes due to fund requirements of institutional investors at the end of the quarter. Companies usually park their money in liquid schemes to meet their short-term fund needs rather than leave cash idle. This results in sharp inflows and outflows in the category on a cyclical basis.


Lack of activity kept rates on short-term instruments flat today. Rates on three-month CPs issued by non-banking financial companies were quoted at 7.30-7.50%. Rates on paper from manufacturing companies were at 7.10-7.30%.


Rates on three-month certificates of deposit were quoted at 7.05-7.25%. There were no issuances of CDs so far today.  


–Primary market 

* Godrej & Boyce raised funds through CPs


–Secondary market
* Bank of Baroda’s CD maturing on Oct 4 was dealt five times at a weighted average yield of 7.1191%.
* Indian Railway Finance Corp’s CP maturing on Friday was dealt four times at a weighted average yield of 6.9882%.


At 1700 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










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




Edited by Deepshikha Bhardwaj


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Source: Cogencis

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