Policy transmission disjointed in bond market: RBI deputy governor Patra

The Deputy Governor flagged instances of wild swings in sovereign bond yields in response to factors such as the announcement of the government's borrowing programme and interest rate changes

Certain features of the domestic market for government securities dampen the transmission of monetary policy, with uneven market liquidity being a key factor, Reserve Bank of India (RBI) Deputy Governor Michael Patra said.

“The G-sec (government security) market’s microstructure also tends to dampen transmission… the lament of monetary policy in India is that liquidity in the G-sec market is not uniform across the curve and concentrated in only on-the-run securities of five years, seven years, 10 years and 14 years maturities,” Patra said at the Treasury Heads’ Seminar organised by the RBI at Lonavla on November 12.

The RBI released