RBI plans G-Secs switch for ₹24,000 cr

Our Bureau | | Updated on: Dec 06, 2021

The government, on Thursday, announced the conversion/switch of seven securities, maturing between April 2021 and December 2022, through auction for an aggregate amount of ₹24,000 crore (face value) on September 21.

These seven Government Securities (G-Secs) of ₹10 crore face value will be converted into as many destination G-Secs/ Floating Rate Bonds maturing between September 2031 till December 2060, according to a Reserve Bank of India (RBI) statement.

This conversion/ switch will help the government postpone the redemption pressure at a time when it is set to borrow ₹4.20-lakh crore more in FY21 as pandemic-related expenses for the health and social sectors mount.

RBI started conducting auctions for conversion of G-Secs on the third Monday of every month from April 22, 2019.

Bidding in the auction implies that the market participants agree to sell the source security/ies to the Government of India (GoI) and simultaneously agree to buy the destination security/ ies from the GoI at their respective quoted prices.

OMO purchase

The RBI said it will also conduct the purchase of 3 G-Secs – 6.97 per cent G-Sec 2026; 6.45 per cent G-Sec 2029; and 6.68 per cent G-Sec 2031 – under Open Market Operations (OMOs) for an aggregate amount of ₹10,000 crore on September 24.

OMO purchase by the RBI results in liquidity infusion for banks as it buys G-Secs from them.

Meanwhile, the RBI accepted offers for the 5.79 per cent G-Sec maturing in 2030 under the OMO purchase (as part of ‘Operation Twist’) at a aggressive cut-off yield of 5.9139 per cent and cut-off price of ₹99.09.

This cut-off is probably an indication that the central bank will not allow G-Sec yields to rise at a time when the government has a huge borrowing programme in FY21.

In the secondary market, the aforementioned G-Sec last traded at a yield of 6.0167 per cent and a price of ₹98.35.'

Also read: Bonds yields ease on RBI’s measures to ease liquidity

Also read: RBI announces ₹10,000-cr OMO for sale, purchase of G-Secs


Published on September 17, 2020
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