CD rates marginally rises in second half

Rates on short-term money market instruments fell in early trade after the Reserve Bank of India (RBI) cut interest rates yesterday, but later rose slightly due to lack of demand from mutual funds, dealers said.

On Wednesday, RBI cut repo and reverse repo rates by 50 basis points each to 5.0 per cent and 3.5 per cent. Quotes on certificates of deposits (CDs) rose around 10 basis points in the latter half of the day.

“MFs refrained from investing in short-term papers as they may start facing redemptions by next week for payments towards advance tax outflows,” said a dealer with a mutual fund.

Three-month CDs were quoted at 5.60-5.80 per cent today compared with 5.80-5.90 per cent yesterday. Three-month commercial papers were quoted at 9.40-9.55 per cent.

Rates rose during early trade, but settled at yesterday’s levels as mutual funds were trading in the secondary market to take profits, dealers said.