RBI resumes operation twist as inflation, supply concerns mount

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August 25, 2020 11:52 AM

India’s central bank will resume its Federal Reserve-style Operation Twist to calm rising yields as quickening pace of inflation and heavy government bond supply spark concern.

RBI, Reserve Bank of India, inflation, economy, indian economy, economic growth, bondsThe nation’s sovereign bonds came under pressure after the RBI left interest rates unchanged at its recent policy meeting.

India’s central bank will resume its Federal Reserve-style Operation Twist to calm rising yields as quickening pace of inflation and heavy government bond supply spark concern. The Reserve Bank of India will buy 100 billion rupees of bonds and sell an equivalent amount of shorter debt on Aug. 27 and on Sept. 3, it said in a statement. The central bank had last resorted to such an operation on July 2.

Yields on 5.79% 2030 debt dropped 10 basis points to 6.12% after the announcement. The nation’s sovereign bonds came under pressure after the RBI left interest rates unchanged at its recent policy meeting and refrained from announcing measures to support the market reeling from a record 12 trillion rupees of government bond sales this fiscal year.

Market strains became even more evident after the RBI offered higher than expected yields at a debt auction Friday after minutes of the August meeting showed members had turned more hawkish on inflation.

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