The Reserve Bank of India (RBI) has announced a liquidity injection of Rs 1.25 lakh crore through open market operations (OMO) to help ease rising bond yields, especially after the recent tensions between India and Pakistan following the April 22 terror attack in Pahalgam.
Bond yields, particularly on the 10-year benchmark government bond, have gone up in the past few days. According to CCIL data, the yield on the 6.79% 2034 bond rose by about 7–8 basis points after the attack. On April 28, the 10-year benchmark bond closed at 6.396%.
For keeping comfort in the system liquidities and also to augment the bond trading, the RBI would carry out Open Market Operations buying in four tranches of Rs 50,000 crore on May 6 and Rs 25,000 each on May 9, May 15, as well as May 19. This would come as a relief to the bond market as well as ease pressure on coupon rate of new 10-year benchmark bond, which would be offered on May 2.
Experts say that although the system currently has a liquidity surplus, there could be a short-term drain due to upcoming foreign exchange maturities. The RBI’s timely OMO announcement aims to prevent any liquidity crunch and stabilise market sentiment during geopolitical uncertainty.
Market players are of the view that the move by the RBI will soothe surging bond yields and also boost investor sentiment in light of heightened border tensions.
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Source: Moneycontrol.
News Desk
