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| MFs buy CDs as rates seen easing in April |
| Newswire18 / Mumbai Apr 01, 2009, 00:34 IST |
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Mutual funds started purchasing certificates of deposit (CDs) issued by banks On Tuesday on expectations that interest rates will ease in April, dealers said. Moreover, the CDs placed On Tuesday in primary market will be issued in April and mutual funds expect to get inflows in their liquid schemes next month, dealers said.
“The rates on CDs are expected to fall significantly in April as banks then would not be keen on raising money,” said a dealer with a mutual fund. This month, banks placed around Rs 34,500 crore of CDs compared with Rs 23,000 crore a year ago.
According to dealers, mutual funds had sold huge quantum of papers in the secondary market since last week and so they purchased papers in primary market On Tuesday. “Mutual funds are not facing huge redemption currently and are holding on to cash since the past few days. They are also expecting cash to be adequate in April due to government spending,” said a dealer with a mutual fund.
The rates on one-year CDs fell by 20-25 basis points On Tuesday, compared with last week, dealers said. On Tuesday, one-year CDs were dealt at 7.00 per cent, compared with 7.20-7.40 per cent. According to dealers, the rates have already started falling this week and they expect it to decline drastically from now on.
Three-month CDs were dealt at 7.10-7.30 per cent, while three-month commercial papers (CPs) were quoted at 8.75-9.25 per cent On Tuesday.
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