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Informist, Tuesday, Sept. 29, 2026

 

By Meera Nair

 

MUMBAI – Yields on select certificates of deposit and commercial papers rose Tuesday amid quarter-end positioning and higher US Treasury yields, dealers said. Yields on six-month commercial papers rose 10 basis points, while there were no trades in three-month and one-year CPs issued by AAA-rated non-bank finance companies, as investors remained cautious amid heightened market volatility, they said.

 

Six-month yields rose mainly because mutual funds, facing redemption pressure, sold CPs, while NBFCs had limited capacity to buy them, a dealer at a brokerage said. Yields on six-month CPs rose to 7.35-7.40% from 7.25-7.30% Monday.

 

Yields on AAA-rated one-year CDs rose five basis points to 7.45-7.50% from 7.40-7.45%. However, yields on three-month CDs were unchanged at 6.30-6.35% from Monday, while six-month CD yields were slightly lower at 6.85-6.90% from 6.87-6.90%.

 

"In the CD market, traders are doing planned investments due to the quarter end... Canara Bank raised two CDs today (Tuesday), one three-month CD and one February maturity at 6.30% and 6.85%... if the bond was raised two days ago, they could have done 10-15 bps less," a dealer at a public-sector bank said.

 

The lack of trades in the three-month and one-year segments reflected investor caution amid volatility in short-term rates, dealers said. The rise in six-month CP yields also indicated that investors were seeking higher returns to participate in the segment, they said.

 

The net liquidity absorbed by the RBI – a proxy for the banking system liquidity surplus – was INR 4.80 trillion Monday, up from INR 4.39 trillion Sunday. The central bank conducted two overnight variable rate reverse repo auctions Tuesday despite only 50% subscription at the first auction. Some dealers attributed the second VRRR auction to expected quarter-end government inflows, including salary and pension payments, which could further add to the banking system's liquidity surplus.

 

"We usually get triggers for government income (inflows) around 1200 IST... RBI must know this beforehand so they brought another VRRR," a dealer at a state-owned bank said. Other dealers said the RBI held the second overnight VRRR auction because overnight borrowing rates were close to the 5.00% floor rate amid ample liquidity in the banking system.

 

At the second overnight VRRR auction for INR 1.00 trillion, the RBI accepted bids worth INR 337.70 billion. At the first overnight VRRR auction for INR 2 trillion, the RBI accepted bids worth INR 1.19 trillion. Some dealers now expect the RBI to increase its daily VRRR auction size to INR 2.50 trillion-3.00 trillion, as the banking system's liquidity surplus is likely to remain elevated at INR 4.75 trillion-5.00 trillion. 

 

In the CD market, issuances were at INR 75.75 billion, with IDBI Bank, Canara Bank, Union Bank of India, and CSB Bank – tapping the market. Canara Bank raised a total of INR 35.25 billion through two CD at a weighted average yield of 6.30% and 6.85%, while Union Bank of India also raised a total of 29.50 billion through two CD at weighted average yields of 6.34% and 6.85%. IDBI Bank raised INR 8.5 billion through 30-day CD at 5.92% and CSB Bank raised INR 2.5 billion at a weighted average yield of 7.30%.

 

"CD yields may rise after the RBI's MPC (Monetray Policy Committee meeting) because of the stance... but not sure as of now, as we have to see the guidance and it also depends on the liquidity position," the dealer from the public-sector bank said. 

 

Talking about the demand for the key tenors, the dealer said people are completely in wait-and-watch mode for the longer tenors (one year and above) as the markets are very uncertain and volatile now.

 

Primary issuances in the CP market rose to INR 37.20 billion from INR 30.35 billion Monday, according to Clearing Corp. of India Ltd. data. Sundaram Finance, Kotak Securities, Aditya Birla Capital, Bajaj Financial Securities, Bajaj Financial Securities, and HDFC Securities were among the issuers. 

 

Sundaram Finance borrowed INR 10.50 billion via a 351-day CP at a weighted average yield of 7.88%, while Kotak Securities raised a total of INR 3.75 billion via two CPs maturing in 15 days and 91 days at 6.55% and 6.95%, respectively. 

 

In the secondary market, CD volumes rose modestly to INR 68.60 billion from INR 68.40 billion on Monday, while CP volumes fell sharply to INR 29.41 billion from INR 55.75 billion. 

 

The dealer from the brokerage firm said CD rates might come down this week, while CP can't predict much as there are largely no trades happening currently.  

 

--Primary market

* IDBI Bank, Canara Bank, Union Bank of India, and CSB Bank issued CDs Tuesday.

* Sundaram Finance, Kotak Securities, Aditya Birla Capital, Bajaj Financial Securities, Bajaj Financial Secirities, HDFC Securities issued CPs Tuesday.  

 

--Secondary market

* HDFC Bank's CD maturing Thursday was traded once at a weighted average yield of 5.80%.
* NABARD's CP maturing Thursday was traded once at a weighted average yield of 5.80%.

 

The following were the volumes, in INR billion, in the secondary market for short-term debt at 1700 IST, as detailed on CCIL's F-TRAC platform:

 

Certificates of deposit		Commercial paper
Tuesday	Monday	Tuesday	Monday
68.60	68.40	29.41	55.75

 

 

Edited by Deepshikha Bhardwaj

 

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