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Informist, Friday, Jan. 2, 2026

 

--RBI bought INR-41.55-bln gilts outside OMO auction in week to Dec 26

 

NEW DELHI – The Reserve Bank of India bought INR 41.55 billion worth of gilts in the secondary market in the week ended Dec. 26, data released by the central bank Friday showed. The entirety of the buys were settled on Dec. 24, which means the RBI bought the gilts on Dec. 23. This was the same day when the 10-year benchmark gilt yield had risen to 6.70%, the highest in the current financial year started April 2025. 

 

Traders had speculated the central bank had bought bonds in the secondary market on Dec. 23, when 'Others' – a category that includes the RBI – had net bought INR 47.40 billion of gilts, Clearing Corp. of India data showed. After market hours the same day, the central bank announced INR 2 trillion of purchases through open market operation auctions in four tranches between Dec. 29 and Jan. 22.

 

"Just as we thought, it looks like the RBI was frontrunning its own action," a dealer at a private-sector bank said. "This data confirms that the RBI is not comfortable with yields (the 10-year benchmark yield) around 6.70% and now that will become a sort of line in the sand for the market."

 

RBI Governor Sanjay Malhotra has said open market operations are primarily used to manage liquidity instead of influencing bond yields. The RBI's net injection into the banking system – a proxy for the liquidity deficit – was INR 616.36 billion on Dec. 23 due to outflows linked to advance tax and goods and services tax payments in December.

 

The central bank had last bought gilts in the secondary market in the first two weeks of November, picking up INR 272.80 billion of bonds. Traders speculated this was to replenish its portfolios with a near-equivalent amount of gilts after the maturity of the 5.15%, 2025 bond on its books. The latest purchases take the RBI's total bond buys through both primary and secondary market OMOs to over INR 7 trillion.

 

Traders expect the RBI to once again purchase gilts on-screen in January, when the 7.59%, 2026 bond matures on Jan. 11. Market participants estimate the central bank holds INR 350 billion-INR 400 billion of the bond. However, some dealers said that the central bank may forego any additional purchases at it has three auctions of INR 500 billion each scheduled on Jan.5, Jan. 12 and Jan. 22, which may take care of the replacement demand.   End

 

Reported by Aaryan Khanna

Edited by Tanima Banerjee

 

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