The yield on the benchmark bond rose four basis points to 8.1220 even as the Reserve Bank of India (RBI) on Monday announced another round of open market operations (OMO) for Rs 10,000 crore.
The yield on the benchmark bond rose four basis points to 8.1220 even as the Reserve Bank of India (RBI) on Monday announced another round of open market operations (OMO) for Rs 10,000 crore. The RBI also simultaneously announced the sale of government securities for Rs 12,000 crore. The government has back-ended borrowings for 2018-19. Monday’s yield of 8.1220 5 was the highest in five sessions.
The money markets have been anxious on concerns of liquidity. Typically September is a time when the advance tax outflows cause some shortage of liquidity; the outflow this time around is estimated at `1.3 lakh crore. Moreover, the market expects the outflows of another Rs 1,00,000 crore on account of CAMPA funds moving to the government account.
This is the second OMO purchase by the central bank in September as the RBI purchased securities of the same amount of Rs 10,000 crore on September 19.
Liquidity adjustment facility (LAF) of fixed rate repo operations also observed a sharp increase on Monday at more than `10,600 crore. The LAF for the three-day period until September 24 stood at `4,006 crore.
“The combination of rising currency in circulation, a widening current account and slowing inflows into the capital account have necessitated open market operations,” said experts at India Ratings.
The RBI and capital market regulator Securities Exchange Board of India (Sebi) on Sunday said they were closely monitoring activities in the financial markets and ready to take appropriate actions, if required, following a sharp meltdown on Friday in equity and debt markets.
The purchases were announced amid worries among the non-banking financial companies (NBFCs) even after the central bank announced that the situation is still under control and they are ready to continue their financial support for the NBFC sector.