New OMO round soothes bond yields

Yields on corporate bonds fell by 35 basis points today as the announcement of another round of special open market operations next week by the Reserve Bank of India comforted investors, dealers said.

Today, the RBI said it will conduct special OMO auctions on Mar 4, through which it will simultaneously buy and sell government securities worth 150 bln rupees each.

"The market needs action from the RBI now..... we have to understand there is no appetite in the market to buy bonds, and that can only be there if words are met with actions," a fund manager said.

Surplus liquidity has prompted banks to invest in corporate bonds along with government securities and state development loans.