Informist, Tuesday, Mar 28, 2023
By Vishal Sangani
MUMBAI – Rates on short-term debt papers such as commercial papers and certificates of deposits rose today because of the low demand from mutual funds, dealers said.
Demand from fund houses were low as they were facing redemption pressure in their liquid schemes due to fund requirements from institutional investors as the financial year approaches an end.
Companies usually park their money in liquid schemes to meet their short-term fund requirements rather than leave cash idle. This results in sharp inflows and outflows in the category on a cyclical basis.
Most mutual funds were facing redemption pressure on shorter end papers, which led to a sharp rise in rates in the secondary market, dealers said.
Today, rates on short-term debt papers maturing in 5-10 days were traded in the range on 7.50-9.26% in the secondary market.
Some mutual funds were active in the secondary market in an attempt to churn their debt portfolios ahead of the end of the financial year.
As at 1645 IST, secondary market volumes of CPs on Clearing Corp of India’s F-TRAC platform were at 68.35 bln rupees, against the usual daily volume of 25-30 bln rupees.
Rates on three-month CPs issued by non-banking finance companies were quoted at 7.80-8.05%, up from 7.60-7.85% on Monday, while rates on papers of manufacturing companies were quoted at 7.60-7.80%, up from 7.40-7.60% on Monday in the secondary market.
Rates on three-month CDs were quoted at 7.60-7.80%, up from 7.30-7.50% on Monday.
Heavy activity in the secondary market today kept investors and issuers away from primary issuances in the short-term debt market, dealers said.
So far, no CPs deals were reported in the primary market. On Monday, Export-Import Bank of India had raised 12.50 bln rupees through CPs.
Activity in the primary market remained subdued today because most issuers remained on the sidelines due to low demand for funds and higher quoted in the secondary market.
On the other hand, National Bank for Agriculture and Rural Development was the lone issuer of certificates of deposit today, raising 6 bln rupees at 7.75% through papers maturing in one year. The financial institution tapped the market for its funding needs and to roll over papers that are set to mature in the coming days, dealers said.
On Monday, NABARD had raised 10 bln rupees through CDs.
Most banks remained on the sidelines as there is no immediate need for funds and also as some banks have already rolled over papers that are set to mature in the next few days.
Liquidity in the banking system is currently estimated to be in a deficit of 455.75 bln rupees, down from 658.17 bln rupees on Monday. The liquidity deficit narrowed because of some inflows on account of government spending.
The liquidity deficit may narrow further 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.
–Secondary market
* HDFC Bank’s CD maturing on Apr 13 was dealt two times at a weighted average yield of 8.3502%
* Bajaj Finance’s CP maturing on Wednesday was dealt seven times at a weighted average yield of 7.0459%
At 1645 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 Maheswaran Parameswaran
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