Short-Term Debt: Rates of CDs fall further on surging demand
Rates on certificates of deposit and commercial papers are on the downtrend as demand for these papers is surging as per dealers. "There are a lot of papers maturing now, because of the large number of
issuances that took place in March," according to dealers. As a result of this, mutual funds, the largest buyers of short-term papers are flush with cash. In March 2012, a whopping `93919 crore was raised by banks through the issuance of CDs.
PSU banks have been the most active in the CD market. For instance Indian Overseas Bank was the largest issuer of CDs today, having raised `1000 crore through three-month papers at 9.05%.
Three-month CDs were placed at 9.05-9.20% compared with 9.25-9.40% on Wednesday. One-year CD rates fell to 9.50-9.60% from 9.60-9.70%. "Rates have softened, but it is unlikely that the three-month CD rates will fall below 9% in the near term," said a dealer with a state-owned bank. Rates on commercial papers also declined tracking the fall in CD rates. Three-month CPs were placed at 9.40-9.50% today.
Rates on certificates of deposit and commercial papers are on the downtrend as demand for these papers is surging as per dealers. "There are a lot of papers maturing now, because of the large number of
issuances that took place in March," according to dealers. As a result of this, mutual funds, the largest buyers of short-term papers are flush with cash. In March 2012, a whopping `93919 crore was raised by banks through the issuance of CDs.
PSU banks have been the most active in the CD market. For instance Indian Overseas Bank was the largest issuer of CDs today, having raised `1000 crore through three-month papers at 9.05%.
Three-month CDs were placed at 9.05-9.20% compared with 9.25-9.40% on Wednesday. One-year CD rates fell to 9.50-9.60% from 9.60-9.70%. "Rates have softened, but it is unlikely that the three-month CD rates will fall below 9% in the near term," said a dealer with a state-owned bank. Rates on commercial papers also declined tracking the fall in CD rates. Three-month CPs were placed at 9.40-9.50% today.
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