Last week the central bank had offered to go for an outright purchase of government bonds worth ₹10,000 crore as part of the planned OMO
The Reserve Bank of India (RBI) on Thursday declined to accept any bids to purchase government bonds under open market operations (OMO).
Last week, the central bank had offered to go for an outright purchase of government bonds worth ₹10,000 crore as part of the planned OMO. While it received bids worth only ₹66,473 crore, the central bank accepted none of the bids. The central bank had offered to purchase long-term securities maturing between 2026 and 2031.
So far, the central bank had been simultaneously buying and selling bonds of equal amounts with an intention to keep the operational liquidity neutral. But this is the first time in this fiscal year that the central bank has announced an outright OMO purchase. The RBI had last done an outright OMO purchase operation on 26 March of ₹15,000 crore
Even though the liquidity surplus in the banking system has come down from its recent highs of ₹7 trillion to ₹4.06 trillion as of Wednesday, it is still at a huge surplus.
“The market’s appetite for bonds will come in a big way only if CPI inflation comes down, new monetary policy committee is constituted and visibility over further action of OMO and rate cut is well established,” said Harihar Krishnamoorthy, treasury head, FirstRand Bank.
The central government revised its borrowing target to ₹12 trillion, out of which it has already borrowed ₹7.06 trillion in the first half of the financial year.
The 10-year bond yield closed at 6.01%, up 2bps on Thursday from its previous close
