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Benchmark yield at 2-wk low as RBI cancels OMO sales

Monday’s fall in bond yield is the highest single-day decline in over a year. Benchmark bonds started to rally since the beginning of the day and eventually hit an intra-day low of 6.885 per cent near the end of the session.

By: ENS Economic Bureau | Mumbai |
November 21, 2017 1:06:18 am
Reserve Bank of India, RBI On Friday, RBI decided to withdraw the OMO sales worth Rs 10,000 crore scheduled for November 23, citing market developments and fresh review of the current and evolving liquidity conditions.

The benchmark yield fell 16 basis points on Monday to close at a two-week low of 6.89 per cent even as market participants cheered the cancellation of the open market operation (OMO) sales of Central government securities by the Reserve Bank of India (RBI) along with a reduction in the quantum of state development loans to be auctioned next Tuesday.

Monday’s fall in bond yield is the highest single-day decline in over a year. Benchmark bonds started to rally since the beginning of the day and eventually hit an intra-day low of 6.885 per cent near the end of the session.

Vijay Sharma, executive vice-president for fixed income at PNB Gilts, believes that the market is taking note that yields have gone up far too much in a short period of time. “Cancellation of OMO is a much needed speed breaker to that process. Furthermore, the SDL auction for this week is also on the lower side, thereby reducing the supply that market has been grappling with,” Sharma said.

On Friday, RBI decided to withdraw the OMO sales worth Rs 10,000 crore scheduled for November 23, citing market developments and fresh review of the current and evolving liquidity conditions. So far, the central bank has conducted close to Rs 90,000 crore of OMO sales this fiscal year to neutralise the excess liquidity in the system.

FE

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