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 per cent over last year and 32 per cent 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 per cent 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 stabilise as corporate bond issuances improve with stabilisation 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 per cent as on July 31, compared with 13 per cent in the year-ago period," he said.
Icra said CP yields have been hardening since the December 2017 quarter after surplus liquidity created post-demonetisation started reducing and two consecutive rate hikes by RBI.
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