Money & Banking

RBI to conduct OMO to adjust yield curve

Our Bureau Mumbai | Updated on April 23, 2020 Published on April 23, 2020

The Reserve Bank of India (RBI) has decided to conduct simultaneous purchase of government securities (G-Secs) maturing in 6-10 years and sale of securities (cash management bills, or CMBs, and treasury bills) maturing in the next couple months to a year for ₹10,000 crore each under special Open Market Operations (OMO) on April 27.

The special OMO is probably aimed at correcting yields at the short- and long-end of the Government Security yield curve.

Marzban Irani, CIO-Fixed Income, LIC Mutual Fund, said yields at the short-end of the G-Sec market have come down as the RBI has been conducting long-term repo operations (LTROs). However, yields at the long-end have gone up. So, the simultaneous purchase of G-Secs and sale of securities will adjust the yield curve.

LTROs to purchase G-Secs of three-years tenor are being conducted by the RBI to inject durable liquidity into the banking system and ensure transmission of monetary policy changes. Under LTRO, banks get funds at the repo rate, which is currently at 4.40 per cent.

On April 27, the RBI will purchase G-Secs maturing in 2026 (coupon: 7.59 per cent); 2028 (7.17 per cent); 2029 (7.26 per cent); and 2030 (7.61 per cent).

It will simultaneously sell two CMBs maturing on June 16 (77-day CMB) and June 23, 2020 (84-day CMB); 182-day treasury bill (maturing on October 15, 2020) and 364-day treasury bill (maturing on April 15, 2021).

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Published on April 23, 2020
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