RBI did not buy or sell gilts in Feb 7 wk after nearly INR 600-bln buys Jan
This story was originally published at 18:51 IST on 14 February 2025
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--RBI did not buy or sell any gilts via OMO in week ended Feb 7
MUMBAI – The Reserve Bank of India did not buy or sell gilts from the secondary market in the first week of February after buying gilts worth nearly INR 600 billion in January, data released Friday showed. This is the first week since Jan. 10 that the RBI has not bought gilts either in the secondary market or at auction.
The RBI bought gilts worth INR 588.35 billion in January, of which INR 388.15 billion were through screen-based secondary market purchases. Last week, the RBI refrained from announcing fresh measures on liquidity after the Monetary Policy Committee meeting but said it would be proactive with infusing liquidity. The RBI, however, doubled the size of Thursday's auction and bought INR 400 billion worth of gilts.
In the week ended Jan. 24, the RBI bought 208.50 billion of gilts outside auction, the largest such buy since the week ended Feb. 12, 2021. The central bank has been infusing liquidity in the latter half of January after liquidity deficit in the banking system shot up. There was a significant drain of systemic liquidity over the last two months due to advance tax payment, capital outflows and RBI's intervention in the foreign exchange market, and an increase in the currency in circulation, RBI Governor Sanjay Malhotra said on Feb. 7. The durable liquidity slipped into deficit in January for the first time in over five years.
Bond market traders have been keenly tracking Clearing Corp. of India Ltd. data for clues on the RBI's buys in the secondary market. For the week ended Feb. 7, 'Others' – a segment that comprises insurance companies, provident funds and the central bank – bought gilts worth INR 41.60 billion in the secondary market, down from INR 61.46 billion in the previous week.
The RBI did not announce any additional liquidity easing measures after the Monetary Policy Committee meeting last week. Some market participants were of the view that the RBI might announce an OMO auction calendar. However, Malhotra just said the central bank will be "watchful and remain nimble in providing the required amount of liquidity". After market hours Friday, the RBI doubled the size of next week's scheduled gilt open market purchases through auction to INR 400 billion.
On Jan. 27, the central bank announced structured measures to infuse durable liquidity. The RBI announced purchases of government bonds worth INR 600 billion via open market operations in three tranches, which it has since expanded to INR 1 trillion. It also announced a six-month dollar/rupee buy/sell swap auction for $5 billion, and a 56-day variable rate repo auction for INR 500 billion.
In the first tranche of the OMO auctions, the central bank bought INR 200.20 billion worth of four gilts on Jan. 30. The RBI also accepted bids worth $5.10 billion at the dollar/rupee buy/sell swap auction on Jan 31. On Friday, it also conducted a 49-day variable rate repo auction, where it accepted INR 750 billion. End
Reported by Aaryan Khanna
Edited by Saji George Titus
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