INSUBCONTINENT EXCLUSIVE:
Authors: JordanFor the third straight week, RBI couldn't sell everything on offer, leading to a spike in bond yields
The Reserve Bank of India (RBI) unexpectedly announced it would buy
Rs 10,000 crore ($1.50 billion) of government bonds via open market operation (OMO), after failing to sell all the debt it had offered to
bidders earlier on Friday
It was the third straight week when the RBI couldn't sell everything on offer, leading to a spike in bond yields.The 10-year government bond
yield rose to 7.75 percent from 7.74 percent before the auction result was announced
India Core Banking Solution (E-Kuber) system between 10.30 a.m
and 12.00 noon on May 17, 2018 (Thursday)The bond-purchase announcement is expected to soothe the market, but the RBI may have to conduct a
few more to assure investors of its support, traders and analysts said."While the announcement of the OMO purchase is likely to cool G-sec
yields in the immediate term, the extent of further reduction in G-sec yields would take a cue from whether this is a one-off, or whether
additional OMO purchases would be announced going forward," said Aditi Nayar, principal economist at local ratings agency ICRA.The RBI will
buy 8.12 percent 2020 bond, 6.84 percent 2022 bond, 7.72 percent 2025 bond, 6.79 percent 2027 bond, and 8.24 percent 2033 bond via open
202525-May-2546.79%GS 202715-May-2758.24%GS 203310-Nov-33Auction results released earlier on Friday showed the RBI could sell only Rs 255
crore ($38.13 million) of the 6.65 percent 2020 bond, out of the Rs 2,000 crore on offer.The remaining Rs 1,745 crore had to be bought by
primary dealers, the underwriters of local bond auctions
The RBI has taken a series of steps to bolster the bond market, including removing restrictions on foreign investors from buying only mid-
Last month, it also raised the foreign investment limit.But state banks, the largest segment of investors, still stayed away on concern the
RBI will raise interest rates in coming months.Last week, the RBI managed to sell only Rs 25 crore of the Rs 3,000 crore on offer for 7.37
percent 2023 bond into the market.The rest of the Rs 2,957 crore had to be taken up by the primary dealers
