India RBI May be Augmenting its T-Bill Holdings, Traders Say
(Bloomberg) -- India’s central bank probably bought Treasury bills indirectly for a second successive week from the market, traders said, citing data which shows outsized purchases.
A category of investors, which includes the central bank, insurance and pension companies, bought bills worth 169.7 billion rupees ($2.3 billion), Clearing Corporation of India data showed late Wednesday. While the data didn’t provide a breakdown, traders said a large purchase is typically associated with the central bank. The six-month bill was scooped up in a similar fashion last week.
The RBI probably asked state banks and primary dealers to buy 182-day bills at the weekly auction, which are then resold to the central bank, said two Mumbai-based traders, who didn’t want to be cited as they aren’t authorized to speak publicly.
The market speculation was confirmed Thursday when the central bank included the same 182-bills in the 100-billion-rupee Operation Twist it announced for the next week, where it plans to buy long-end bonds and sell shorter debt to keep yields under check. There are growing worries the government may expand borrowings to fight the deadly onslaught of pandemic that threatens to weigh on the economy.
There is a possibility of higher bond sales in the coming weeks and if that leads to higher yields, “the RBI would have a good amount of ammunition to deal with the rise in yields,” said Badrish Kulhalli, head of fixed income at HDFC Life Insurance Ltd. in Mumbai.
The Reserve Bank of India didn’t immediately respond to a request for a comment. However, it announced 100 billion rupees of Operation Twist for May 6, where it plans buy 6.97% 2026, 7.17% 2028 and 5.85% 2030 bonds and sell 182-day bills.
State banks sold Treasury bills worth 106.6 billion rupees, while primary dealers offloaded 58.3 billion rupees of bills, CCIL data showed. The 182-day treasury bill was sold at a cutoff yield of 3.4507%, way below the 3.55% estimated in a Bloomberg poll.
The central bank in its April policy had said it would do more Operation Twists in addition to the explicit 1 trillion rupees of bond purchases for this quarter under a new plan to support the government’s near-record 12 trillion rupees of bond sales for the current fiscal year.
Sovereign bonds were largely resilient on Thursday, with the yield on benchmark 10-year bond up one basis point to 6.06%. It has declined 12 basis points this month.
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