Informist, Tuesday, Sep 26, 2023
By Asmita Patil
MUMBAI – Rates on short-term debt papers rose today as mutual fund houses, grappling with quarter-end redemption pressure, sold papers in the secondary market, dealer said.
Rates on three-month commercial papers issued by non-banking financial companies rose to 7.40-7.60% from 7.30-7.50% on Monday. Rates on similar maturity papers of manufacturing companies remained flat at 7.10-7.30% due to lack of activity in these papers.
Rates on three-month certificates of deposit rose to 7.10-7.20% from 7.05-7.25% on Monday.
Mutual funds face redemption pressure in liquid schemes close to the end of a quarter due to fund requirements of institutional investors. Companies usually park their surplus money in liquid schemes rather than leave cash idle. They redeem their investments at the end of a quarter to meet their short-term fund needs. This results in sharp inflows and outflows from liquid schemes on a cyclical basis.
There were no issuances in the primary short-term debt market, dealers said.
On Monday, companies and financial institutions had raised 36.75 bln rupees through commercial papers, and banks raised 30.5 bln rupees through certificates of deposit.
Rising liquidity deficit in the banking system has also affected market sentiment, dealers said.
At the end of trade on Monday, liquidity in the system was estimated to be in a deficit of 1.36 trln rupees, against a deficit of 1.17 trln rupees on Friday.
Reversal of the incremental cash reserve ratio added around 270 bln rupees to liquidity on Saturday. In the coming days, market participants expect liquidity to improve slightly due to the government’s month-end spending in the form of salary and pension payments.
–Secondary market
* Canara Bank’s CD maturing on Oct 3 was dealt seven times at a weighted average yield of 7.2475%.
* Can Fin Homes’ CP maturing on Wednesday was dealt twice at a weighted average yield of 6.8268%.
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:
NOTE: Details of the deals have been received from market sources.
End
Edited by Ashish Shirke
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