Issuances of certificates of deposit were low on Monday because fund houses preferred to remain on the sidelines due to limited inflows and continued tight liquidity conditions in the system, dealers said.
The tight liquidity in the banking system is seen from the bids received at the RBI repo window. On an average, banks have borrowed over Rs one lakh crore from the window last week. Fund houses keen on investing are preferring to buy three-month certificates of deposits (CDs) due to the narrow spread. The spread between a three-month and one-year CD is just 50-60 basis points.
Three-month CDs were quoted at 7.8 to eight per cent, as against 7.9-8.1 per cent on Friday, while one-year CDs were quoted at 8.4-8.6 per cent, compared to 8.3-8.5 per cent on Friday. Three-month commercial papers were quoted at 8.3-8.5 per cent, as against 8.5-8.6 per cent on Friday.
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