Money is becoming costlier. On Tuesday, two large private banks priced a Rs 7,000-crore one-year certificate of deposit (CD) issue at 7.45-7.55%. With this, yields in the corporate bond market have effectively shot up about 100 basis points (bps) in a little over a month. According to market participants, the prevailing rate on one-year CDs in early December was 6.6-6.7%. For perspective, State Bank of India’s MCLR or the marginal cost of fund-based lending rate, for one year, is 7.95%.
The yield on the Fixed Income Money Market and Derivatives Association (FIMMDA) 10-year benchmark for AAA-rated corporates has shot up 40 basis points (bps) since the end of September 2017. The yield closed Tuesday’s session at 7.94% — 69 bps above the yield on the benchmark 10-year government security (g-sec). Net corporate bonds outstanding at the end of December 2017 was Rs 26.5 lakh crore, up 16% year-on year. Non-food credit or loans to companies and individuals grew at 11.5% in the fortnight to January 5.