The Reserve Bank has decided to conduct purchase of government securities under Open Market Operations (OMO) for an aggregate amount of ₹20,000 crore on February 10. This announcement comes in the wake of sharp jump in yields of government bonds over the past two weeks.
After the announcement, India 10-year bond yield eased to 6.034% as compared to previous close of 6.071%.
Holding policy interest rates unchanged at record lows on Friday, RBI Governor Shaktikanta Das assured investors that its stance on liquidity remained accommodative and that the government’s ₹12.06 trillion borrowing programme for the fiscal year starting April would be managed in a smooth and orderly manner.
Despite the pledge from the RBI, bond yields had surged on Friday as investors had been hoping for a more clarity in the form of a bond purchase calendar. Yields on most bonds however retreated later on Friday, following the debt auction results.
The central bank sold only ₹9000 crore of bonds versus ₹31000 crore it had set out to sell on Friday, with underwriters to the auction buying ₹8810 crore worth of the paper, after the market demanded higher yields.
In a statement, announcing its OMO operations, the central bank today said: “The Reserve Bank stands committed to ensure the availability of ample liquidity in the system in order to foster congenial financial conditions. On a review of current liquidity and financial conditions, therefore, the Reserve Bank has decided to conduct purchase of Government securities under Open Market Operations (OMO) for an aggregate amount of ₹20,000 crore on February 10, 2021.”
Eligible participants should submit their bids in electronic format on the Reserve Bank of India Core Banking Solution (E-Kuber) system between 10:00 am and 11:00 am on February 10, 2021. Only in the event of system failure, physical bids would be accepted.
The result of the auctions will be announced on the same day and successful participants should ensure availability of securities in their SGL account by 12 noon on February 11, 2021. (With Agency Inputs)