So far, the RBI had been announcing standalone and special OMOs to bring down yields. The announcement of an OMO calendar will give much-needed clarity to the bond market which is staring at a Rs12 trln government borrowing
MUMBAI: The Reserve Bank of India (RBI) on Wednesday announced a secondary market government security acquisition programme (GSAP 1.0) wherein the central bank will purchase government bonds worth Rs1 trillion from the secondary market in the first quarter of this fiscal. The first purchase of Rs25,000 crore will take place on 15 April.
“While laying out the liquidity management strategy for 2021-22, let me unequivocally state that the Reserve Bank’s endeavour is to ensure orderly evolution of the yield curve, governed by fundamentals as distinct from any specific level thereof. Our objective is to eschew volatility in the G-sec market in view of its central role in the pricing of other financial market instruments across the term structure and issuers, both in the public and private sectors," RBI governor Das said on Wednesday while announcing the monetary policy statement first by-monthly monetary policy statement of fiscal 2021-22.
Bond yields fell 1 basis point to 6.11% soon after the announcement. Traders said bond yields are unlikely to rise any further.
With this announcement, RBI has satisfied a long-standing demand of the bond market of anopen market operation (OMO) calendar. So far, RBI had been announcing standalone and special OMOs to bring down yields, refusing to divulge details of a calendar in advance. This move of announcing an OMO calendar will give much-needed clarity to the bond market which is staring at a government borrowing programme of Rs12 trillion this financial year.
Meanwhile, the RBI today kept interest rates unchanged, as was widely expected, and also maintained its accommodative monetary policy amid concerns that rising coronavirus infections could derail the nascent economic recovery.
The RBI kept repo rate or its key lending rate at 4% while the reverse repo rate or its borrowing rate was left unchanged at 3.35%.