CD issuances persist as rates decline

Banks continued to issue certificates of deposit today as most of them were refinancing the papers that matured recently and also due to comfortable rates, dealers said. Rates fell by 5-10 bps today for six-month papers.

“Banks are finding these levels comfortable to raise their required funds,” said a dealer at a state-owned bank. Today, banks placed CDs worth Rs 2,400 crore against Rs 3,400 crore on Wednesday.

Mutual funds continued investing in CDs as they expect rates on short-term money market instruments would fall soon, dealers said. According to market participants, the central bank may cut rates soon as inflation rate is seen easing further and to infuse growth in economy.

“Mutual funds received inflows in their liquid schemes today and were investing in six-month CDs today,” said a dealer at a mutual fund. However, issuances of commercial papers continued to remain subdued as investors are still uncertain on placing their money in CPs and prefer to invest in CDs, dealers said.