RBI Announces Fourth Round Of Special OMO Purchase and Sale of Government of India Dated Securities

The Reserve Bank of India, on a review of the current liquidity and market situation and an assessment of the evolving financial conditions, has decided to conduct simultaneous purchase and sale of government securities under Open Market Operations (OMO) for ₹ 10,000 crores each on January 23, 2020 (Thursday). The Reserve Bank will purchase 7.32% government bond maturing on 28-Jan- 2024 and 6.45% government bond maturing on 07-Oct-2029. The Reserve Bank will also simultaneously sell securities using the multiple price auction method. This includes the 7.80% government bond maturing on 11+Apr-2021 and 7.94% government bond maturing on 24-My-2021.

The Reserve Bank reserves the right to decide on the quantum of purchase/sale of individual securities, accept bids/offers for less than the aggregate amount, purchase/sell marginally higher than the aggregate amount due to rounding-off effects, accept or reject any or all the bid/offers either wholly or partially without assigning any reasons. The eligible participants should submit their bids/offers in electronic format on the Reserve Bank of India Core Banking Solution (E-Kuber) system.

In late December last year, the RBI began conducting these special bond purchase and sale operations to reduce the spread between short term and long term interest rates in the bond market. Long term rates have remained high despite 135 basis points in policy rates, while short term rates have fallen due to surplus liquidity. The purchase of longer-dated securities helps reduce the yields on long-term bonds, while the sale of short-term government securities can push short-term bond yields upwards.

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