RBI purchases Rs 10,000-crore G-Secs, sells Rs 6,825 crore securities via OMOs

RBI purchases Rs 10,000-crore G-Secs, sells Rs 6,825 crore securities via OMOs

Last week, the RBI had announced simultaneous purchase and sale of government securities under OMOs for Rs 10,000 crore each.

MUMBAI: The Reserve Bank on Monday purchased Rs 10,000 crore worth of long-term government securities and sold Rs 6,825 crore of four short-term securities through the special open market operations (OMOs). Last week, the RBI had announced simultaneous purchase and sale of government securities under OMOs for Rs 10,000 crore each.

In the OMO purchase of 6.45 per cent GS 2029, which is a benchmark security, the RBI received Rs 20,826 crore worth of bids from the participants but accepted.

"This operation was done to align the yield curve where we can see too much of steepening now. This kind of steepening is seen in a growing economy with high growth rate, which is not the case here," said a treasury dealer with another state-run bank adding that the auctions will help in rationalise the curve.

In terms of number of bids, the central bank received 30 bids for 6.65 per cent GS 2020; 26 for 7.80 per cent GS 2020, 13 for 8.27 per cent GS 2020 and 47 for 8.12 per cent GS 2020 but accepted 6, 13, 3 and 13 bids, respectively.

Analysts said the simultaneous sale and purchase of government bonds through OMO auctions were held to correct the yield curve to make it more representative of the current economic condition.

The Reserve Bank of India has reduced repo rate by 135 basis points between February and October 2019 but there has been a delay in passing on the cut in repo rate by lenders.


Last week, DBS Bank economist, Radhika Rao, in a note said the special OMO auctions, similar to the US Federal Reserves' "Operation Twist" announced in September 2011 and ran through end-2012, is part of broader measures by the RBI to expedite policy transmission.