Primary issuance low on liquidity

Primary issuance fell today because banks had raised significant amount of funds this week and also as mutual funds received limited inflows in their liquid schemes, dealers said.

“Banks have already placed a lot this week and so they preferred to remain on the sidelines today,” said a dealer with a state-owned bank.

This week, banks placed around Rs 3,800 crore worth of CDs and companies placed around Rs 1,465 crore worth of commercial papers.

Today, banks placed CDs worth Rs 550 crore, against Rs 1,500 crore on Wednesday.

Liquidity in the banking system is comfortable and so most of the banks were not in a hurry to raise funds, dealers said.

“Mutual funds also refrained from purchasing papers as they received limited inflows and also because they have invested a lot this week,” said a dealer with a mutual fund.

According to dealers, trade volume could rise only after Interim Budget as investors are preferring to wait and watch whether Reserve Bank of India cuts key interest rates.

Three-month certificates of deposit were quoted at 5.90-6.15 per cent, unchanged from Wednesday.

Three-month commercial papers also remained unchanged at 9.50-10.00 per cent.

Volume in the secondary market was subdued because investors preferred to remain on the sidelines, dealers said.

“In the secondary market too, trade was low as mutual funds are not facing redemption amid comfortable cash flows,” said a dealer with a mutual fund. Rates in secondary market fell by 10-15 basis points amid lack of market participants.

Corporation Bank and State Bank of Mysore’s February CDs were dealt at 4.00 per cent.