Short-Term Debt: Rates dn tracking lower cut-off at T-bills auction

Informist, Thursday, Aug 4, 2022


By Vishal Sangani


MUMBAI – Rates on short-term debt instruments such as certificates of deposit and commercial papers declined marginally, tracking the lower cut-off set by the Reserve Bank of India at the Treasury-bills auction and also due to the prevailing surplus liquidity in the banking system.


On Wednesday, the cut-off yield at the auction for 91-day Treasury bills was set at 5.5586% as against 5.6229% on Jul 27.


Rates on three-month CPs of non-bank finance companies fell to 6.00-6.15% as against 6.05-6.20% on Wednesday, while those on papers of manufacturing companies were down by five basis points at 5.80-6.00%.


Rates on three-month CDs were down at 5.70-5.95% as against 5.75-6.00% on Wednesday.


Liquidity in the banking system is currently estimated to be in a surplus of over 1.94 trln rupees, against 2.02 trln rupees on Wednesday.


The liquidity surplus had widened in the last few days on account of the government's month-end spending in the form of salaries and pension payouts, and redemption of the 8.08%, 2022 bond.


Market participants said a repo rate hike of 35-50 basis points by the Reserve Bank of India is already priced in the current short-term debt papers rate. The three-day Monetary Policy Committee meeting started on Wednesday and a decision on policy rates will be announced on Friday.


In a poll by Informist, all 30 respondents expected the rate-setting panel to hike the repo rate, but the divide on quantum was visible. A dozen respondents expect the repo rate to be hiked exactly by 50 bps, 11 by 35 bps, two by 25 bps, and one by 40 bps. The other four respondents gave a range for the hike–two of 35-50 bps, and one each of 25-35 bps and 40-50 bps.


Informist exclusively also reported today, quoting a banking industry source, that the Reserve Bank of India's Monetary Policy Committee may mull pausing rate hikes after the policy outcome on Friday.


"RBI would like to pause after August to see the impact of past front-loaded hikes and US actions," the source said. "RBI won't try to match the US Fed on actions. It won't be part of the pack that try to match the US on every action."


The MPC has already raised the repo rate by 90 basis points in May-June. Additionally, the RBI raised the effective policy rate by 40 bps through the introduction of the Standing Deposit Facility in April.


Market participants will also watch the central bank's commentary on liquidity.


Meanwhile, issuances of CPs declined in the primary market today due to low market participation. Both issuers and investors remained cautious ahead of the outcome of the Monetary Policy Committee meeting on Friday, dealers said.


Aditya Birla Housing Finance was the only issuer that tapped the market for its funding needs. The company raised 2 bln rupees through papers maturing in three-month at 5.86%.


On Wednesday, companies had raised 35.75 bln rupees through CPs.


Meanwhile, Jammu & Kashmir Bank was the lone issuer of CDs today, raising 2.00 bln rupees at 5.50% through papers maturing on Mar 17. The state-owned bank tapped the market for its funding needs, dealers said.


The last time Jammu & Kashmir Bank tapped the CD market was in January 2019, according to data compiled by Informist.


On Wednesday, Indian Bank was the only issuer had raised 8 bln rupees through CDs.


–Secondary market

* HDFC Bank's CD maturing on Jun 15 was dealt three times at a weighted average yield of 6.5897%

* Small Industries Development Bank of India's CP maturing on Oct 31 was dealt six times at a weighted average yield of 5.7051%


At 1530 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:


Certificates of deposit

Commercial papers







NOTE: Details of the deals have been received from market sources.




IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT


Edited by Maheswaran Parameswaran


For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.


Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.


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