The Reserve Bank of India (RBI) today stepped in to stem the relentless fall of the yield on government papers by announcing Rs 11,000 crore worth of open market operations (OMO) through sell of two securities. This is the largest OMO to be conducted by the RBI in recent times.
The RBI will sell two bonds from its portfolio for up to Rs 11,000 crore through multiple-price auctions tomorrow. It will sell the 5.87 per cent 2010 bond for up to Rs 5,000 crore and the 6.25 per cent 2018 bond for up to Rs 6,000 crore.
The 10-year paper yield, which dropped to historic low of 5.82 per cent during the day, bounced back to 5.95 per cent after the announcement of the OMO. The prices at the long end dropped by over Rs 1.20 after rising by an identical margin during the day, marked by extreme volatility.
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