Mutual funds sold shorter-tenure papers in the secondary market as most of them faced redemptions from banks today, dealers said. “Banks were redeeming money On Thursday as Friday is a holiday and only two days are left for the year-end,” said a dealer. Rates also inched up 20 basis points due to redemption pressure.
Banks were investing in certificates of deposits (CDs) in the secondary market On Thursday to take advantage of the rise in rates. “Rates will ease by 100-150 basis points mid-April, so most of the investors are buying CDs now, hoping to sell them later at higher prices,” said a dealer at a mutual fund.
State Bank of Patiala’s June maturity CDs were dealt at 7.10 per cent On Thursday compared with those of State Bank of Indore, that were dealt at 6.85 per cent.