Continuing its ‘Operation Twist’ into the new calendar year, the Reserve Bank of India (RBI), on Thursday, said it will conduct a special open market operation (OMO), entailing simultaneous purchase and sale of Government of India dated Securities (G-Secs), on January 6.
Unlike the earlier two special OMOs (both conducted in December 2019) when it purchased only one Gsec (which matures in 2029 and carries 6.45 per cent coupon rate), in the forthcoming special OMO, the central bank will purchase three GSecs maturing in 2024 (coupon rate: 7.32 per cent), 2026 (7.27 per cent) and 2029 (6.45 per cent) for an aggregate amount of ₹10,000 crore.
Simultaneously, the RBI will sell 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) for an aggregate amount of ₹10,000 crore. The central bank had sold these GSecs in the earlier OMOs, too.
“The RBI purchased only one long-end GSec (maturing in 2029) in the earlier special OMOs. But this time it is also purchasing medium-tenure GSecs. This move is probably aimed at aligning the yield curve,” said Marzban Irani, CIO-Fixed Income, LIC Mutual Fund.
Irani felt the central bank may conduct seven or eight ‘twists’ or special OMOs.
Meanwhile, the RBI will auction a 70-Day Government of India Cash Management Bill (CMB) for a notified amount of ₹30,000 crore on January 6.
By auctioning CMB, the central bank is trying to suck out excess liquidity in the financial system. Excess liquidity could exacerbate inflation, said Irani.
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.