In fourth OMO, RBI buys ~10,000 cr of long-term securities

In the fourth special open market operation (OMO) auctions, the Reserve Bank of India (RBI) on Thursday bought ~10,000 crore worth of long-term securities and sold ~2,950 crore worth of shortterm government bonds.

Last week, the RBI had said it would simultaneously purchase and sell government securities under open market operations (OMO) of ~10,000 crore each.

In the OMO purchase auction, the RBI received bids worth ~26,887 crore for two types of securities — 7.32 per cent-2024 and 6.45 per cent2029 — but accepted only ~10,000 crore of bids.

For 7.32 per cent-2024, it got 157 bids and accepted 40 bids. The RBI got 147 bids for 6.45 per cent-2029 bonds but accepted 105 bids.

The cut-off yield for 7.32 per cent-2024 was 6.408 per cent, while for 6.45 per cent2029, it was 6.5780 per cent.

The RBI offered to sell two government securities — 7.80 per cent-2021 and 7.94 per cent-2021 — through the OMO. It received ~35,375 crore of bids but accepted ~2,950 crore of bids.

In terms of number of bids, the central bank received 85 bids for 7.80 per cent-2021 and 70 bids for 7.94 per cent-2021 but accepted three and seven bids, respectively.

The cut-off yield for 7.80 per cent-2021 was 5.6714 per cent and for 7.94 per cent2021 was 5.7192 per cent.

These special OMO auctions are similar to the US Federal Reserves’ Operation Twist aimed at faster transmission of policy rates, an analyst said.

The RBI has reduced repo rate by 135 basis points between February and October 2019 but there has been a delay in passing on the cut i n the repo rate by lenders.

The central bank has reduced repo rate by 135 basis points between February and October but there has been a delay in passing on the cut in the repo rate by lenders