There were no issuances of certificates of deposit (CDs) and commercial papers on Tuesday as fund managers remained cautious on liquidity despite some inflows trickling into their schemes, dealers said.
Most mutual funds preferred to invest only in non-convertible debentures having daily put/call options, as liquidity outlook is highly uncertain, fund managers said.
Tata Motor issued Rs 165 crore of 89-day non-convertible debentures at 75 basis points above Mumbai Interbank Offered Rate. These papers are highly liquid and offer the flexibility of redeeming investments on an overnight basis.
Fund managers were also cautious on potential inflows in their schemes as the third instalment of advance corporate tax will move out by mid-December. Typically, mutual fund schemes witness big outflows during advance tax payments.
Rates remained unchanged since Monday amid thin trade, as liquidity condition has improved in the banking system.
On Tuesday, three-month commercial papers were quoted at 12.50-13.50 per cent, compared with 13-14 per cent on Monday, while three-month CDs were unchanged at 11-12 per cent.
Secondary market
Rates eased as banks were keen to buy papers in November and December maturities on Tuesday, while mutual funds remained net sellers, dealers said. “Mutual funds prefer loading off shorter tenure papers since the past one week,” said a dealer with a mutual fund.
December maturity CDs were dealt in the 9.75-10.25 per cent compared with 10.5-11.25 per cent on Monday.
State Bank of Hyderabad’s December maturity CDs were dealt at 9.75 per cent compared with 10.00-10.50 per cent on Monday. November maturity papers were dealt in the range of 9.00-9.50 per cent unchanged from Monday.
