Short-term debt rates rise 5-10 bps
Rates on short-term money market instruments rose by 5-10 basis points today because of the continued tight liquidity in the banking system, dealers said.
Three-month certificates of deposit (CD) quoted at 8.70-8.90 per cent, as against 8.60-8.80 per cent Friday, while three-month commercial papers were at 9.00-9.20 per cent against 8.90-9.10 per cent.
Rates for one-year papers were at 9.00-9.20 per cent, unchanged from Friday. Rates are expected to inch up further by the end of this week as banks and companies redeem from fund schemes to make advance tax payments.
By December 15, companies will pay an estimated Rs 40,000 crore towards the third installment of advance tax.
“Three-month CDs are likely to touch 9 per cent this week because liquidity will tighten further as mutual funds will prefer to hold on to cash on expectation of redemptions,” said a dealer with a mutual fund.
Fund houses also prefer to invest in three-month CDs, as the spread between a three-month and one-year CD has narrowed to 30-40 basis points.