RBI Buys Rs 10,000 Crore Worth Long-Term Government Securities In Second Special OMO
The Reserve Bank of India (RBI) logo is displayed on a gate outside the central bank’s regional headquarters in New Delhi. (Photographer: T. Narayan/Bloomberg)

RBI Buys Rs 10,000 Crore Worth Long-Term Government Securities In Second Special OMO

In the second special open market operation, the Reserve Bank of India on Monday bought Rs 10,000 crore of long-term government securities and sold Rs 8,501 crore of three short-term bonds.

The RBI had announced to purchase and sell simultaneously government securities under OMO for Rs 10,000 crore each, last week.

Though RBI offered to sell four securities in the auction, it accepted bids for three bids only.

In the OMO purchase of 6.45 percent GS 2029, the 10-year benchmark security, the RBI received Rs 25,698 crore worth of bids from the participants but accepted Rs 10,000 crore of bids.

The RBI received 285 bids to purchase 6.45 percent-2029 security but accepted only 151 bids. The cutoff yield at which bids were accepted was 6.4874 percent.

The RBI offered to sell four government securities - 6.65 percent GS 2020; 7.80 percent GS 2020; 8.27 percent GS 2020 and 8.12 percent GS 2020 through OMO sale.

It accepted only Rs 8,501 crore worth of bids for the three securities as against Rs 38,551 crore bids it received in for four securities in the OMO sale auction.

In terms of number of bids, the central bank received 27 bids for 6.65 percent GS 2020; 34 for 7.80 percent GS 2020 and 29 for 8.27 percent GS 2020 and but accepted 11, 12 and 8, respectively.

For 8.12 percent GS 2020 security, the RBI received 49 bids but did not accept any bid.

In a similar auction held last week, the RBI had purchased and sold same securities in the market.

It had purchased Rs 10,000 crore of long-term government security while sold Rs 6,825 crore of four short-term securities. These special OMO auctions are similar to the U.S. Federal Reserves' 'Operation Twist' aimed at faster transmission of policy rates, an analyst said.

The Reserve Bank of India has reduced repo rate by 135 basis points between February and October 2019 but there has been a delay in passing on the cut in repo rate by lenders.

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