RBI infuses Rs 50,000 crore into system through OMO

Synopsis

A ₹50,000 crore Open Market Operation auction saw better-than-expected demand, leading to a rally in bond yields. The 10-year benchmark yield dropped four basis points to 6.65%. This operation, part of the RBI's liquidity infusion measures, is expected to move system liquidity into a comfortable surplus.

Mumbai : Better than expected levels in the latest open market operation (OMO) auction of ₹50,000 crore triggered a rally in bond yields, as the 10 year benchmark yield closed at 6.65%, four basis points lower than its previous close, CCIL data showed.

The OMO received bids of ₹87,161 crore, and three out of the seven bonds in the auction were accepted at lucrative levels than market prices, treasury heads said.

The 7.18% GS 2033 paper saw the most demand, with ₹26,406 crore offered, of which the RBI accepted ₹20,346 crore. While the 6.92% GS 2039 paper saw the least demand with markets offering ₹1,999 crore, of which the RBI accepted ₹1,780 crore.

“The OMO was definitely better than expected and as soon as the cut off prices were released, the 10-year paper saw a rally. The RBI took some bonds at lucrative levels than the market, especially the 6.33% GS 2035 paper,” said Gopal Tripathi, head of treasury at Jana Small Finance Bank.

The price of 6.33% GS 2035 paper was trading at 97.97, while the RBI accepted the paper at 98.18.

Similarly the 6.28% GS 2035 paper was trading at a price of 98.68, while the RBI accepted the paper at 98.73, CCIL and RBI data showed.

The OMO auction was part of the RBI’s recent liquidityinfusing measures and marked the final operation in the current OMO calendar.

Experts do not expect additional steps in the near term, as system liquidity is likely to move into a comfortable surplus once the proceeds from this OMO auction are fully infused into the banking system.

“I do not expect any immediate announcement on liquidity in the policy on Friday. With this OMO auction, the system liquidity will be around ₹2.50 lakh crore. Additionally, the pressure on rupee is lifted after the trade deal, hence outflows via intervention, if any, would be minimal” Tripathi said.

Banking system liquidity stood at a surplus of ₹1.95 lakh crore on Wednesday.

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