RBI buys INR-200-mln bonds via OMO in wk ended Dec 27, first time since Jul
This story was originally published at 18:43 IST on 3 January 2025
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--RBI bought gilts worth INR 200 mln via OMO in week ended Dec 27
NEW DELHI – The Reserve Bank of India bought INR 200 million worth of bonds in the open market in the week ended Dec. 27, its first purchase through screen-based open market operations since the week ended Jul. 19. The RBI's most recent screen-based activity has been on the selling side.
It was also the central bank's first bond purchase without an offsetting sale since Oct. 7, 2021. This was just a week after it concluded its Government Securities Acquisition Programme, along with selling securities through an auction of the same size.
Market expectations of the RBI conducting open-market gilt purchases have increased due to the increasing liquidity tightness in the banking system. On Dec. 27, when the RBI bought bonds, the central bank injected INR 1.91 trillion into the banking system through its liquidity operations. Gilt prices had also fallen that day, with some panic among bond traders, as the rupee fell as much as 0.6% intraday against the dollar.
Its most recent screen-based bond activity has been on the selling side. Between Jul. 5 and Sept. 20, the central bank net sold gilts to the tune of INR 240.40 billion through OMOs, data showed. The pace of these sales had slowed, before halting in the week ended Sept. 27. At the time, liquidity conditions had been heavily in deficit.
Bond traders did not see a large impact of the RBI's action on government bond prices on Monday, and said the amount was too small to infer its intent. In fact, dealers were disappointed the central bank only bought a small amount, as they had expected RBI to begin buying gilt buys in earnest--up to INR 30 billion a week--in December to shore up liquidity. Others were optimistic that with the RBI testing the waters on bond buys in the secondary market, it may also announce an open market operation auction to buy gilts soon. End
Reported by Aaryan Khanna
Edited by Akul Nishant Akhoury
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