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Informist, Friday, Oct. 11, 2024

 

--RBI sold gilts worth INR 200 mln via OMO in week ended Oct 4 

 

MUMBAI – After a week's break, the Reserve Bank of India sold government securities worth INR 200 million through screen-based open market operations in the week ended Oct. 4, data from the central bank's website showed.

 

In the week ended Sept. 27, the central bank broke its nearly three-month streak by not conducting screen-based OMO sales. Between Jul. 5 and Sept. 20, the central bank had sold gilts to the tune of INR 240.40 billion through OMOs, data showed.

 

While many looked at the break as a precursor to the Monetary Policy Committee changing its stance to 'neutral' from 'withdrawal of accommodation', some considered OMO sales to be unnecessary due to the tight liquidity conditions in the week ended Sept. 27. Out of the five working days in the mentioned week, the liquidity was in deficit for three working days, data from the RBI showed. 

 

Before the release of the data, the market had widely expected the RBI to not have conducted OMO sale in the week ended Oct. 4 as both the liquidity and money market rates were in their comfortable band, dealers said. The central bank's comfortable band is expected to be around 6.30% to 6.50%, dealers said. For the week ended Oct. 4, the liquidity in the banking system has largely been in surplus, according to data RBI's website. 

 

However, there were a few market participants who expected the central bank to conduct OMO sales as they believed that these operations were at least partly aimed at curbing the exuberance in the government bond market.

 

"There is a possibility of RBI conducting OMO sale because it doesn't seem that the RBI is trying to control liquidity with these operations," a dealer at a private bank said prior to the weekly data release. "The amount of OMO conducted by them is not large enough to have an impact on liquidity." In the week ended Oct 4., the yield on the 7.10%, 2034 bond rose by 8 basis points.  End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Reported by Siddhi Chauhan

Edited by Akul Nishant Akhoury

 

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