Large supplies of certificates of deposits (CD) continued today as banks issued fresh CDs to refinance outstanding CDs maturing in February, according to dealers. | |
Mutual funds continued to mop up such supplies as they deployed inflows of their fixed maturity plans, dealers said.
| REFINANCING GALORE | | Issuers | Amount (Rs cr) | Term | Rate (%) | | IDBI Bank | 500 | 1 year | 9.89 | | CBoP | 100 | 3 months | 10.20-10.30 | | Karnataka Bank | 100 | 6 months | 10.03 | | Federal Bank | 15 | 6 months | 9.95 |
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| Total CDs worth around Rs 700 crore were issued today as against Rs 800 crore yesterday. |
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| "Some banks' CDs had maturity in February so they are refinancing them again. Mutual funds bought such CDs as rates remained steady today," said a dealer at a mutual fund. |
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| Most banks were eager to place CDs even at higher rates today in anticipation that rates may rise further in March when liquidity is expected to tighten further. |
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| "It is better for banks to place CDs now in February as, in March, liquidity is likely to shrink further and the rates for short-term debt will rise more," said a fund manager at a mutual fund. |
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| Demand for such papers from mutual funds may also fall in March as they would face big redemptions in their liquid and debt schemes. |
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