CD issue spree continues

Large supplies of certificates of deposits (CD) continued today as banks issued fresh CDs to refinance outstanding CDs maturing in February, according to dealers.

Mutual funds continued to mop up such supplies as they deployed inflows of their fixed maturity plans, dealers said. 
 

REFINANCING GALORE
Issuers	Amount (Rs cr)	Term	Rate (%)
IDBI Bank	500	1 year	9.89
CBoP	100	3 months	10.20-10.30
Karnataka Bank	100	6 months	10.03
Federal Bank	15	6 months	9.95

Total CDs worth around Rs 700 crore were issued today as against Rs 800 crore yesterday.

"Some banks' CDs had maturity in February so they are refinancing them again. Mutual funds bought such CDs as rates remained steady today," said a dealer at a mutual fund.

Most banks were eager to place CDs even at higher rates today in anticipation that rates may rise further in March when liquidity is expected to tighten further.

"It is better for banks to place CDs now in February as, in March, liquidity is likely to shrink further and the rates for short-term debt will rise more," said a fund manager at a mutual fund.

Demand for such papers from mutual funds may also fall in March as they would face big redemptions in their liquid and debt schemes.