Better bond yields in last one year boost short-term paper volume: ICRA

Excess reliance on short-term debt poses rollover risks and hence liquidity risks for the borrowers

The firming up of bond yields in the last one year has improved attractiveness of short-term paper such as commercial paper (CP). The pool of outstanding CPs saw a 96 per cent growth at Rs 6.39 trillion in 12 months ended July 2018, according to rating agency ICRA.

It, however, warned that such excess rise carries certain risks, such as rollover paper on maturity and liquidity.

The rise was also partly due to CPs issued for funding Initial Public Offerings for HDFC Asset Management Company. It has spiked the CP outstanding volume by Rs 700 billion. However, even excluding this, the YoY