Issuances of certificates of deposit fell today because mutual funds preferred to remain on the sidelines due to the tight liquidity in the system, dealers said.
Today, three-month certificates of deposit were quoted at 8.3-8.4 per cent, as against 8.4-8.5 per cent Tuesday, while three-month commercial papers were quoted at 8.7-8.9 per cent, compared with 8.6-8.8 per cent on Tuesday.
Rates for the one-year tenure were quoted at 8.9-9.1 per cent, compared with 8.9 to nine per cent on Tuesday.
"Demand from investors have been limited as most of them are holding on to cash on expectation that the liquidity could tighten further within the next fortnight," said a dealer with a state-owned bank.
The cash crunch is expected to worsen further next month owing to outflows towards advance tax payments by corporates. Companies will pay the third instalment of advance tax, estimated to be around Rs 40,000 crore, by December 15.
"A lot of CDs will mature this month and so we could see some supply. There are views that the rates could inch up slightly if demand from fund houses remains low," said a dealer with a mutual fund.
