India commercial paper rates may rise further as liquidity dries up: Analysts

Indian Analysts said that companies could have to spend more in order to raise short-term funds through commercial papers, as liquidity tightens and government borrowings with similar tenures increase.

Short-term rates are on the rise since the Reserve Bank Of India They have already risen rates by 4% since last year. This is due to the growing liquidity deficit in the banking industry. At the end of the fiscal year, the government increased borrowing via treasury bills.

Earlier This week, the state-run financial institution NABARD It raised funds for three months at 7.65%. This was more than 40 basis points above what it paid for similar paper one month ago.

Shadow lenders Bajaj Finance, Aditya Birla Finance Tata Capital FinancialRegular issuers paid 7.84%-7.90% to purchase a three-month paper. This was up 20-30bps over the previous two weeks. These Since then, rates have been at their highest levels October-November 2018.

“We were already seeing a rise in rates of commercial papers, and companies will have to shell out even more with tighter liquidity conditions likely in March,” Anand NevatiaFund manager Trust Mutual Fund.

The Refinitiv The benchmark CP index of non-bank financial institutions, which represent the largest borrowers on the CP market, revealed that rates have jumped to the highest levels in over a decade. March 2020 was the year that the pandemic struck. Barring The pandemic period is when the rates are at their highest since November 2018.

The Market participants reported that there has been a significant jump in CP rates across all categories. Even top-rated companies are paying more. “Since the current rise in yields is more due to broader factors and not any sector or a company-specific issue, we are seeing a uniform jump,” Venkatakrishnan SrinivasanThe founder and managing partner for a debt advisory firm. Rockfort Fincap.

“The three-month CP rates of highly rated companies may remain above 7.75%, while the one-year rates may linger around 8.25%, unless the RBI induces more liquidity in the system,” Srinivasan said.

New Delhi Through a sale of assets, the company will borrow 500 billion rupees ($6.06 trillion) more. Treasury Bills In March. Banking Most of the time, system liquidity remained in deficit February You could see a drop in your tax bill and GST payments.

“We have seen short-term yields soaring because of tightening liquidity and recent higher inflation prints which have led to market disagreement on terminal rate expectations,” Sanjay Pawar Fixed income fund manager LIC Mutual Fund.