The central bank has announced a series of measures to tide over any liquidity issues caused by the Coronavirus dislocation in the markets
The central bank received bids worth Rs 45,049 crore for Friday's open market operation
The central bank infused Rs 10,000 crore through open market operations on Friday
The central bank will conduct open market operations (OMO) on March through a multi-security auction
The government securities will be purchased through a multi-security auction using the multiple price method
If the volatility in the financial market continues for a prolonged period, it could also result in important implications for asset prices
The cut-off yield for 7.32 per cent-2024 was 6.408 per cent, while for 6.45 per cent-2029, it was 6.5780 per cent
There is fear that the RBI has no wiggle room for further rate cuts. Without rate support, yields will rise. This translates into a fall in prices for bonds
Long-term bond yields have come down by 20 bps since first OMO last month
Offers to purchase three securities, including 10-year benchmark govt bond
RBI said it reserves the right to decide on the quantum of purchase/sale of individual securities; accept bids/offers for less than the aggregate amount
The 10-year bond yields closed the year at 6.555 per cent, from its January 1 level of 7.418 per cent. Bond prices rise, yields fall.
Interestingly, instead of the 10-year bond yields coming down, it increased about 5 basis points to close at 6.55% after the OMO
The rupee started at 69.44 a dollar, and on December 27, closed at 71.32 a dollar.
The RBI had announced to purchase and sell simultaneously government securities under Open Market Operations (OMO) for Rs 10,000 crore each, last week
Analysts expect the central bank to cut repo even further
Earlier this week, the central bank had conducted a similar open market operations (OMO) and purchased securities worth Rs 10,000 crore and sold worth Rs 6,825 crore
The central bank had planned to buy up to Rs 10,000 crore of 10-year bonds and sell up to Rs 10,000 crore of four short-term bonds
With this, analysts believe, the RBI intends to lower yields on long-term bonds, and keep the liquidity at the system level intact. The move will allow the government to borrow at lower cost.
Move signals lower bond yield at the long end