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The Reserve Bank of India (RBI) on Monday said it will conduct simultaneous purchase and sale of Government securities (G-Secs) under Open Market Operations (OMO) for an aggregatei amount of ₹10,000 crore each on February 25, 2021.
Under this exercise , also known as ‘Operation Twist’ (OT), RBI purchases G-Secs/ GS of longer maturities and sells an equal amount of G-Secs of shorter maturities to manage the yield curve. This move is aimed at softening the yield curve at the longer end.
RBI will purchase three G-Secs -- 5.22 per cent GS 2025, 6.45 per cent GS 2029 and 6.57 per cent GS 2033 -- aggregating ₹10,000 crore under OT. Simultaneously, it will sell two G-Secs -- 8.79 per cent GS 2021 and 8.20 per cent GS 2022 -- aggregating ₹10,000 crore.
The OT move comes in the backdrop of G-Sec prices hardening due to over supply of paper on account of higher government borrowing.
G-Sec prices had declined last Friday, erasing the previous day’s gains, as the Government devolved on Primary Dealers (PDs) about 61 per cent of the ₹11,000 crore it wanted to raise via auction of the 2035 security.
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