RBI announces simultaneous sale, purchase of bonds to boost liquidity; check date, other details

The RBI will purchase Rs 10,000 crore of 6.45 per cent government bonds maturing 2029 on December 23 this year. Rs 10,000 crore of short-term bonds maturing 2020 will be sold.

The Reserve Bank of India (RBI) on Thursday decided to conduct simultaneous purchase and sale of government securities under open market operations (OMO) after reviewing the current liquidity and market scenario. The RBI will purchase Rs 10,000 crore of 6.45 per cent government bonds maturing 2029 on December 23 this year. Rs 10,000 crore of short-term bonds maturing 2020 will be sold. “On a review of the current liquidity and market situation and an assessment of the evolving financial conditions, the Reserve Bank has decided to conduct simultaneous purchase and sale of government securities under Open Market Operations (OMO) for ₹10,000 crores each on December 23, 2019 (Monday),” RBI said. The eligible participants can bid or submit offers in electronic format on RBI’s Core Banking Solution (E-Kuber) system between 10.30 am and 12.00 noon on December 23. The result of the auctions will be announced on the same day and successful participants should ensure availability of funds or securities by the next day, RBI also said.

The simultaneous buying and selling of bonds help to boost short-term yields and bring down long-term yields. The bond yields have surged 25 basis points to 6.71 per cent after the RBI’s decision on December 5 to hold policy combined with concerns over government borrowings.

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Bloomberg quoted traders as saying that the sell-off may be overdone as the pause doesn’t necessarily mean the easing cycle has ended. In the last MPC meeting, the central bank, led by Governor Shaktikanta Das, decided to maintain the status quo and did not announce a repo rate cut thereby ending the five consecutive interest rate cut this year by the central bank.