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Short term rates dip in July, benefitting companies

Short term rates dip in July, benefitting companies

22 Jul 2021

MUMBAI: Rates on short-duration loans have declined up to 17 basis points in July, reducing working capital expenses for Indian companies, as the central bank’s stand to underpin growth acts as a tailwind in a liquidity-surplus economy witnessing lower-than-expected federal borrowing.

“Short-term rates are clearly travelling south,” said Marzban Irani, CIO – debt at LIC MF. “Lower-than-expected borrowing plans, coupled with liquidity, comforted investors. The central bank commentary gave enough confidence that rates are not going to harden soon in line with global trends.”

Between July and September, New Delhi sought to borrow Rs 2.21 lakh crore through Treasury Bills – about Rs 20,000-30,000 crore less than the average market estimates.

These are shorter duration securities with maturities up to 364 days. Those set a benchmark for other similar debt instruments.

The 182-day T-Bill yielded 3.55 per cent Tuesday versus 3.72 per cent on June 30, a drop of 17 basis points, show data compiled by LIC Mutual Fund.

During the same period, the 91-day Treasury Bill yielded eight basis points lower, at 3.36 per cent.

This has begun to weigh on commercial paper borrowings with raising three-month commercial papers at 3.45 per cent, about five-seven basis points lower than the levels seen in the last week of June.

The six-month gauge for certificates of deposit is now at 3.77 per cent last week, 14 basis points lower than June-end levels, show latest data from the Financial Benchmarks India.