The Reserve Bank of India’s ‘Operation Twist’, entailing simultaneous purchase of long-tenor government securities (GSecs) and sale of short-tenor GSecs, managed to soften the yields a bit at the long-end of the GSec market on Monday.

The yield on the benchmark 6.45 per cent GSec maturing in 2029 tested an intra-day low of 6.55 per cent, with its price touching an intra-day high of ₹99.25. GSec yield and price move in opposite directions.

The 10-year benchmark finally closed at a yield of 6.5680 per cent (price ₹99.1450) against last Friday’s closing yield of 6.6012 per cent (₹98.91).

The ‘Operation Twist’ came in the backdrop of the RBI maintaining a status on the policy repo rate at the fifth bi-monthly monetary policy review against market expectation of a rate-cut and G-Sec yields consequently going up. At the special Open Market Operation (OMO) for purchase of the 10-year benchmark GSec, the RBI received 161 bids, aggregating ₹20,826 crore, against the notified amount of ₹10,000 crore.

The central bank accepted 145 bids for the notified amount at 6.5462 per cent cut-off yield and ₹99.30 cut-off price. At the special OMO for sale of four GSecs (all maturing in 2020 but carrying different coupon rates – 6.65 per cent, 7.80 per cent, 8.27 per cent and 8.12 per cent), the RBI received bids aggregating ₹20,330 crore against the notified amount of ₹10,000 crore. But the central bank accepted bids for ₹6,825 crore.

Market players say the RBI may have conducted the special OMO to cool the yields at the long end as there is a possibility that the Central government may go in for additional borrowing if the Goods and Service Tax (GST) collections and resource-raising via disinvestment fall short of the target.

Related Topics