Yields on CDs maturing early April cross 11%

Certificates of Deposit (CDs) maturing in the first week of April are being traded at yields above 11 per cent in the secondary market.

“In anticipation of redemption pressures towards the year-end, banks look for high yielding short-term maturities to avoid a larger loss,” said a bond dealer with a domestic brokerage. A loss of 50 basis points for 15-20 days will be very low in absolute terms as compared to that for 3 months and so on, he added.

According to market sources, CD worth Rs 175 crore maturing on April 7 was traded at 11.50 per cent in the secondary market on Monday. In the primary market, banks issued above Rs 4,000 crore worth of CDs on Monday. Three-month CDs were issued at around 9.95 per cent and 1-year CDs were issued at around 10.00 per cent.

Of late, banks have been raising funds heavily from the CD market to meet their yearly targets as the deposit growth was dull when compared with credit growth in this financial year. As of February 25, deposits grew 16.4 per cent in a year while bank advances grew 23 per cent in the same period.