 "Bonds, Govt bond")
Discussions over open market operations (OMO) auctions have temporarily waned among bond market participants, given the current tightness in the banking system liquidity. Market participants anticipate that the system liquidity will persist in deficit mode, at least until mid-December.
“Discussion around OMO is dying down because the liquidity is in a very tight mode. As soon as the liquidity starts easing out, it will again come to the discussion table,” said Vijay Sharma, senior executive vice-president at PNB Gilts. “We expect liquidity to remain tight at least till December 15,” he said.
Market participants expect the liquidity to ease by the end of December due to redemptions and government spending. Government bonds amounting to Rs 78,834 crore are set to mature on December 15. Within the total redemptions of Rs 2.8 trillion slated for the second half of the current financial year, Rs 2.2 trillion worth of bonds were scheduled to mature in the October-December quarter.
The Reserve Bank of India infused Rs 1.04 trillion on Wednesday. The banking system liquidity widened to a near five-year high on November 21 on the back of monthly goods and services tax payments. The central bank had infused Rs 1.74 trillion on that day.
“The market doesn’t expect the RBI to come to the market in the current quarter,” a dealer at a state-owned bank said. “They might come in the next quarter if the liquidity eases, but not now,” he said.
The liquidity has remained largely in deficit mode in the current quarter so far.
More From This Section
In his monetary policy statement, RBI Governor Shaktikanta Das had said the central bank might conduct OMO auctions to mop up liquidity.
The central bank had not given any timeline for OMO sales and said it would depend on the ongoing liquidity situation.
