Short-Term Debt: Rates flat, market pins hope on liquidity support

Friday, May 24


By Rituparna Ghosh


MUMBAI – Issuances of short-term debt papers rose today, but rates remained flat, with dealers assessing the possibility of liquidity supporting measures after the results of the General Elections showed the Bharatiya Janata Party-led National Democratic Alliance retaining power. 


Since Sunday's exit polls, which predicted a victory for the NDA, short-term rates had fallen due to hope that stability at the Centre may lead to steps to ease the liquidity squeeze faced by non-bank lenders.


Rates on commercial papers fell 10-20 basis points this week.


Rates on two-month CPs issued by manufacturing companies were quoted at 6.70-6.80%, unchanged from Thursday. Rates on two-months CPs issued by non-banking finance companies were flat at 6.90-7.00%.


Three-month CPs of manufacturing companies were quoted at 6.80-6.90%, while those issued by non-banking finance companies were down at 7.00-7.10%.


Rates on certificates of deposits also remained flat today, with two-month CDs being quoted at 6.50-6.60%, and three-month CDs quoted at 6.60-6.70%. 


Most non-bank finance companies have been forced to go slow on loan growth because of costly market borrowing, the result of the liquidity squeeze following debt defaults by the systemically important IL&FS group from late August.


According to market players, a victory for the NDA is seen increasing the odds of another dollar/rupee swap auction by the Reserve Bank of India to spur overseas investment flows, and more open market bond purchases to ease the tight liquidity conditions in the banking system.


So far this financial year, the central bank has supplied 349 bln rupees through a foreign exchange swap, and 250 bln rupees through open market bond purchases.


Post market hours today, the RBI announced a 150-bln-rupee of open market bond purchase on Jun 13.


Issuances of CDs were marginally lower today at 28.5 bln rupees compared to 31.5 bln rupees on Thursday. This week, banks sold CDs worth 96.5 bln rupees.


CPs worth 150.5 bln rupees were issued this week. Of the total, 37.5 bln rupees were issued today, against 13.5 bln rupees on Thursday. 


–Primary market

* Network 18 Media and Investments, Reliance Retail, Grasim Industries, National Bank for Agriculture and Rural Development, Steel Authority of India raised funds through CPs today. 

* Bank of Baroda, Indian Bank, Oriental Bank of Commerce raised funds through CDs today. 


–Secondary market

* Indian Bank's CD maturing on Aug 1 was dealt thrice at a weighted average yield of 6.7819%

* Housing Development Finance Corporation Ltd's CP maturing on May 30 was dealt thrice at a weighted average yield of 6.7595%


Following was the volume at 1730 IST in the secondary market for short-term debt, in bln rupees, as detailed by the Clearing Corp of India's F-TRAC platform:


Certificates of deposit

Commercial papers












Edited by Avishek Dutta


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