RBI has announced it would purchase government bonds worth  ₹25,000 crore in two open market operations (OMOs) to infuse durable liquidity into India's banking system. (Mint)
RBI has announced it would purchase government bonds worth 25,000 crore in two open market operations (OMOs) to infuse durable liquidity into India's banking system. (Mint)

Bond market cheers RBI OMO purchase plan, bond yields drop 5 bps

  • 10-year bond yield ended at 7.425% compared with Tuesday's close of 7.474%. Yield on bonds due January 2028 fell 6 bps to 7.556%
  • While the first OMO purchase worth 12,500 crore will take place on 2 May, the date for the second will be announced later

Mumbai: The yield on the benchmark 10-year bond fell five basis points on Wednesday after the Reserve Bank of India (RBI) said it will resume OMO purchases next month. The 10-year bond yield ended at 7.425% compared with Tuesday's close of 7.474%. Yield on bonds due January 2028 fell 6 bps to 7.556%.

Bond yields and prices move in opposite directions.

One basis point is one-hundredth of a percentage point.

On Tuesday, after market hours, RBI announced it would purchase government bonds worth 25,000 crore in two open market operations (OMOs) to infuse durable liquidity into India's banking system.

While the first OMO purchase worth 12,500 crore will be conducted on 2 May, the date for the second will be announced later, the central bank said.

The announcement came after RBI’s $5 billion forex swap auction on Tuesday drew bids for more than three times the size.

Meanwhile, the Indian rupee—in line with its Asian peers—weakened today as a rising dollar and high crude prices weighed on sentiment. The rupee closed at 69.87 vs the dollar, down 0.34% from its previous close of 69.63.

The currency had opened at 69.76 a dollar today.

So far this year, the rupee has gained 0.02%. During the period, foreign investors bought $7.85 billion in equity and sold $584.30 million in the debt market.

India's benchmark Sensex Index rose 1.27% to 39054.68 points today.

Year to date, it has risen 7.14%.

Bloomberg contributed this story.

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