Informist, Friday, Sep 30, 2022
By Vishal Sangani
MUMBAI – Rates on short-term debt instruments such as certificates of deposit and commercial papers fell today because of firm demand from mutual funds and also the comments by the Reserve Bank of India on liquidity, dealers said.
Mutual funds have seen continuous inflow into liquid funds, which are then deployed in short-term debt papers. They are also reinvesting the funds received from the maturity of short-term papers.
Rates on three-month CPs of non-banking finance companies declined to 6.65-6.80% as against 6.75-6.90% on Thursday, while those on papers of manufacturing companies fell by 10 basis points to 6.40-6.65%.
Rates on three-month CDs were at 6.30-6.55% compared with 6.40-6.65% on Thursday.
The Reserve Bank of India’s Monetary Policy Committee hiked the repo rate by 50 basis points, which was in line with expectation.
In an Informist poll, 26 of the 30 respondents said they expected the rate-setting panel to hike the repo rate by 50 bps.
“The MPC is of the view that further calibrated monetary policy action is warranted to keep inflation expectations anchored, restrain the broadening of price pressures and pre-empt second round effects,” according to the monetary policy statement.
The Reserve Bank of India Governor Shaktikanta Das pointed out that liquidity continues to be in surplus and the central bank will continue to fine-tune operations for injection and as well as absorption of liquidity.
Current, temporary moderation of surplus liquidity needs to be seen in the context of the large potential liquidity in the system arising from the expected pick-up in government spending that usually happens in the second half of the financial year, Das said in his statement.
In view of the moderation in surplus liquidity, the RBI has decided to merge the 28-day variable rate reverse repo auction with the fortnightly 14-day main auction.
Liquidity in the banking system is currently estimated to be in a deficit of over 187.28 bln rupees as on today, as against 89.19 bln rupees on Thursday.
On Sep 21, liquidity in the banking system slipped into deficit for the first time since May 2019.
Liquidity in the banking system is expected to return to surplus in the coming days due to inflows on account of the government’s month-end spending in the form of salaries and pension payouts, dealers said.
Meanwhile, issuances of CPs were steady today as a few companies tapped the market to meet their funding needs and rolled over papers set to mature in the coming days.
So far today, CPs aggregating 18.75 bln rupees were issued as against 20.75 bln rupees on Thursday. ICICI Securities was the major issuer, raising 12.50 bln rupees in total through papers maturing in December.
While, UCO Bank was the lone issuer of CDs today, raising 10.00 bln rupees in at 6.30% through papers maturing on Dec 12. The state-owned lender tapped the market for its funding needs and also surplus liquidity in deficit, dealers said.
–Primary market
* HDFC Securities, Godrej Industries, ICICI Securities and Birla Group Holdings raised funds through CPs.
–Secondary market
* State Bank of India’s CD maturing on Monday was eight three times a weighted average yield of 5.8106%
* Indian Oil Corp’s CP maturing on Oct 14 was dealt five times at a weighted average yield of 6.0993%
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:
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 Akul Nishant Akhoury
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