Bond yields rise after RBI announces it will buy Rs 100-billion govt debt

Surplus cash held by banks dropped to Rs 380 billion as of May 3 from a high of Rs 1.1-trillion in April

Sovereign bonds in India rallied after the central bank said it will purchase debt to meet the cash needs of the banking system.

The Reserve Bank of India will buy Rs 100 billion ($1.5 billion) of securities across the yield curve from 2020 to 2033 maturities on May 17, it said late Friday. The purchases come after the shortest bond on sale Friday was rescued by underwriters for a third straight auction.

“This announcement should be seen as a positive surprise by the market as it comes earlier than expected and especially amid liquidity surplus conditions,” Vivek Rajpal and Prashant