Market participants bid aggressively in open market operation purchase and sales

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Published: April 28, 2020 3:15:13 AM

The central bank notified that it received bids worth Rs 64,746 crore against the notified amount of Rs 10,000 crore for its OMO purchases.

The central bank notified that it received bids worth Rs 64,746 crore against the notified amount of Rs 10,000 crore for its OMO purchases.

Market participants bid aggressively during the RBI’s simultaneous purchase and sale of securities on Monday. They showed a significant desperation to sell bonds during the open market operation (OMO) purchase by the RBI that took the cut-off yield higher on one of the securities that was designated for the operation.

The central bank notified that it received bids worth Rs 64,746 crore against the notified amount of Rs 10,000 crore for its OMO purchases. The bonds maturing in 2028 and 2029, which were the erstwhile benchmark bonds, received the highest number of bids in the purchase leg of the OMO. As a result, the cut-off yield on the 7.17% yielding bonds maturing in 2028 stood at 6.425% against its secondary market yield that saw a high of only 6.34% during Monday’s trade.

Experts say the rise in yields could be attributed to market participants’ eagerness to book profits in these bonds. “The OMO is a god-gifted opportunity in current times. Those who must be sitting on these bonds and are already in-the-money or currently stand profitable on their positions in these bonds may have wanted to exit their positions,” said a primary dealer. For the sale leg of the OMO, the RBI received bids worth Rs 50,260 crore against the notified amount of Rs 10,000 crore.

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