RBI To Buy Government Bonds Through Open Market Operations
The Reserve Bank of India has once again stepped in with interventions targeted at ensuring the smooth functioning of local money markets.
The central bank on Wednesday said that it will buy Rs 10,000 crore in government bonds under the open market operations programme to cool-off bond yields which had started to rise.
“With the heightening of Covid-19 pandemic risks, certain financial market segments have been experiencing a tightening of financial conditions as reflected in hardening of yields and widening of spreads. It is important to ensure that all market segments remain liquid and stable, and function normally,” the central bank said in its accompanying statement.
According to the release, the RBI will buy the following securities:
8.20 percent Government Security 2022
7.37 percent Government Security 2023
7.32 percent Government Security 2024
7.72 percent Government Security 2025
The auction will be conducted on March 20, the RBI said. The announcement helped pull down bond yields which has surged to 6.34 percent intraday, but they gained again to end the day at 6.29 percent
Unlike other central banks, India’s monetary policy committee has not yet announced an emergency cut in its benchmark policy rate. The central bank has instead taken targeted measures to ensure that the local foreign exchange and money markets continue to function in an orderly manner.
Last week, the RBI announced that it will conduct a $2 billion sell/buy swap for dollar-rupee to ensure that there are no dollar shortages amid rising outflows. The first such swap was concluded on Monday. A second $2 billion swap auction is scheduled for March 23.
With the announcement of bond purchases under its open market operations, the RBI has opened a third front through which it will try to ensure that markets do not turn illiquidity and rates do not rise. To be sure, the RBI has not announced the frequency of such operations or the extent to which it intends to buy government bonds.
Source : BloombergQuint
The Reserve Bank of India has once again stepped in with interventions targeted at ensuring the smooth functioning of local money markets.
The central bank on Wednesday said that it will buy Rs 10,000 crore in government bonds under the open market operations programme to cool-off bond yields which had started to rise.
“With the heightening of Covid-19 pandemic risks, certain financial market segments have been experiencing a tightening of financial conditions as reflected in hardening of yields and widening of spreads. It is important to ensure that all market segments remain liquid and stable, and function normally,” the central bank said in its accompanying statement.
According to the release, the RBI will buy the following securities:
8.20 percent Government Security 2022
7.37 percent Government Security 2023
7.32 percent Government Security 2024
7.72 percent Government Security 2025
The auction will be conducted on March 20, the RBI said. The announcement helped pull down bond yields which has surged to 6.34 percent intraday, but they gained again to end the day at 6.29 percent
Unlike other central banks, India’s monetary policy committee has not yet announced an emergency cut in its benchmark policy rate. The central bank has instead taken targeted measures to ensure that the local foreign exchange and money markets continue to function in an orderly manner.
Last week, the RBI announced that it will conduct a $2 billion sell/buy swap for dollar-rupee to ensure that there are no dollar shortages amid rising outflows. The first such swap was concluded on Monday. A second $2 billion swap auction is scheduled for March 23.
With the announcement of bond purchases under its open market operations, the RBI has opened a third front through which it will try to ensure that markets do not turn illiquidity and rates do not rise. To be sure, the RBI has not announced the frequency of such operations or the extent to which it intends to buy government bonds.
Source : BloombergQuint