Rates on one-year certificates of deposits (CDs) fell 10-15 basis points On Wednesday because demand for such papers from mutual funds remained strong despite continuous supply in last one week, dealers said.
One-year CD rates have seen less fall in rates compared with other shorter tenures, thus making these papers lucrative investment for mutual funds.
On Wednesday, three-month CDs quoted at 6.25-6.75 per cent, unchanged from Tuesday. Three-month commercial papers were quoted at 10.00-10.50 per cent, steady from Monday.
On Wednesday, banks placed around Rs 1,100 crore of certificates of deposit compared with Rs 2,400 crore yesterday.
Banks are placing one-year CDs as these papers are more feasible for banks because the spread between a one-year and six-month CD has narrowed.
