Cash squeeze inverts country's corporate bond yield curve

Seasonal demand from mutual funds for three-year corporate debt is aggravating the credit curve inversion

The Reserve Bank of India’s tight leash on liquidity is having an undesired effect on short-term borrowing costs for the nation’s companies, making it more expensive to sell one-year commercial paper than longer-tenor notes.

The cost of issuing 12-month commercial paper has risen to 7.84 per cent, or 19 basis points more than average yields on notes maturing in three years, according to data compiled by Bloomberg. The gap had widened to as much as 20 basis points on Jan. 19, the most since February last year.

Excess cash with banks averaged Rs 397 billion ($6.2 billion) last week, compared to a