Money & Banking

RBI to conduct fresh OMO purchase of govt securities

Our Bureau Mumbai | Updated on June 29, 2020

The logo of Reserve Bank of India   -  REUTERS

The Reserve Bank of India (RBI) has decided to conduct simultaneous purchase of Government Securities (G-Secs), maturing between 2027 and 2031, and sale of 182 day and 364 day treasury bills (DTBs) under Open Market Operations (OMO) for ₹10,000 crore each on July 2.

The decision to conduct special OMO follows review of current and evolving liquidity and market conditions, the RBI said in a statement.

Specifically, the central bank will be purchasing four G-Secs or GS – 6.79 per cent GS 2027; 7.26 per cent GS 2029; 6.68 per cent GS 2031; and 6.57 per cent GS 2033 – using the multiple price auction method aggregating ₹10,000 crore. The RBI said there is no security-wise notified amount.

The RBI will be selling four DTBs – two 182 DTBs maturing on October 15 and October 22, 2020; and two 364 DTBs maturing on April 22 and April 29, 2021. The RBI said there is no security-wise notified amount.

Marzban Irani, CIO-Fixed Income, LIC Mutual Fund, said: “In the first quarter, lot of G-Sec matured. So, G-Secs were maturing and market players were buying in the auction.

“As we go into July, maturities of G-Secs are not there. There will be pressure on yields. So, the RBI has announced this (‘Operation Twist’) to ease the pressure.”

Irani observed that the main purpose of the OMO is to bring down the yields at the longer end.

Published on June 29, 2020

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