RBI's infusion of durable system liquidity under OMO keeps bonds in check

Bond yields moved up from 6.5 per cent level last August to nearly about 8 per cent by May

Even as the currency market is keeping investors on edge, the bond market is showing remarkable stability, mirroring US yields and the promise of adequate system liquidity by the Reserve Bank of India (RBI).

The RBI infuses durable system liquidity by purchasing bonds from the secondary market under its open market operations (OMOs). So far this financial year, the central bank has conducted two OMO purchases of Rs 100 billion each.

Various estimates suggest the market is pencilling in OMOs of at least Rs 500 billion in this financial year, with some analysts expecting OMOs of as high as Rs