Issuance of commercial papers touched an all-time high of Rs 4.92 lakh crore

Issuance of commercial papers (CPs) touched an all-time high of Rs 4.92 lakh crore in June quarter on risk-averse investors' reluctance to bet long term, a report said today.

The volumes grew 49 percent over last year and 32 percent over the preceding three months, domestic rating agency Icra said. The trend of higher short-term borrowing has continued in the second quarter of FY19 as well, according to Icra, with the CP outstanding going to a new high of Rs 6.39 lakh crore, a 96 percent growth over the previous year.

"Rising bond yields and the consequent possibility of mark-to-market losses led to investors turning risk-averse and shunning long-term debt instruments, contributing to a surge in issuance of short-term debt instruments," said Karthik Srinivasan, group head for financial sector rating, Icra.

He said CPs have become a "meaningful source of funds" now, but added that the volumes will stabilize as corporate bond issuances improve with stabilization in long-term yields in coming quarters.

"For now, the bias towards short-term instruments has led to the ratio of CP outstanding to long-term corporate bond outstanding has increased to 20 percent as on July 31, compared with 13 percent in the year-ago period," he said.

Icra said CP yields have been hardening since the December 2017 quarter after surplus liquidity created post-demonetization started reducing and two consecutive rate hikes by RBI.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)