Informist, Monday, Oct 25, 2021
By Vishal Sangani
MUMBAI – The rates on three-month commercial papers increased by 10 basis points today due to low demand from mutual funds, dealers said.
The demand from fund houses was low as they are holding back their investments in short-term debt instruments because they want liquidity in hand to invest in ultra short-term CPs of non-banking finance companies in the coming days, said market participants.
Usually, fund houses invest in ultra short-term CPs as these investment options offer better yields in a shorter period.
The initial public offering of FSN E-Commerce Ventures Ltd, the parent company of Nykaa, will open on Thursday and close on Nov 1. Fino Payments Bank’s initial public offering will open for subscription on Friday, and will close on Nov 2.
The rates on three-month CPs of non-bank finance companies rose to 4.00-4.15% as against 3.90-4.05% on Friday, and those on papers of manufacturing companies increased by 10 bps to 3.65-3.85%.
Rates also rose because of the higher cutoff set by the Reserve Bank of India at a variable rate reverse repo auction, said some market participants. On Friday, the central bank had set 3.99% cutoff at 12-day variable rate reverse repo auction and 3.91% weighted average rate, which was higher than market expectation.
The RBI had conducted a 12-day variable rate reverse repo auction on Friday, which saw banks park 4.18 trln rupees as against the notified amount of 4.50 trln rupees.
On the issuances side, a large issuance by Bajaj Finance led to a spike in funds raised through commercial papers today.
Also, some companies tapped the market to roll over papers set to mature in the coming days and to meet fresh requirements for funds.
So far today, CPs aggregating 52.20 bln rupees were issued, as against 1.75 bln rupees sold on Friday. Bajaj Finance raised 40 bln rupees at 4.40% through papers maturing in one month.
On the other hand, banks did not issue any certificates of deposit today as there is no immediate need for funds owing to high surplus liquidity in the banking system and low credit growth.
The loan growth remained muted due to lack of demand for big-ticket loans from corporates and as banks remained cautious in anticipation of rising asset quality stress due to the COVID-19 pandemic.
Liquidity in the banking system is estimated to be in a surplus of over 6.78 trln rupees.
The rates on three-month CDs were quoted at 3.45-3.60%, in the secondary market.
–Primary market
* Indian Oil Corp, Bajaj Finance, Godrej Industries and Housing Development Finance Corp raised funds through CPs.
–Secondary market
* HDFC Bank’s CD maturing on Aug 17 was dealt at a weighted average yield of 4.2501%
* Indian Oil Corp’s CP maturing on Oct 29 was dealt four times at a weighted average yield of 3.5128%
Following are volumes at 1530 IST in the secondary market for short-term debt, in bln rupees, 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 Michael Correya
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Source: Cogencis