INSUBCONTINENT EXCLUSIVE:
heat because of fiscal deficit overshoot
short-term bonds.
'Operation Twist'20 Dec, 2019The Reserve Bank of India will conduct a simultaneous sale and purchase of bonds, it said on
Thursday, in a move seen by market participants as an attempt to bring longer-term yields lower
It is the first time RBI would be conducting a special OMO of this kind, similar to the 'Operation Twist' carried out in the US near the
start of the decade.
What has RBI announced?20 Dec, 2019The central bank said it would buy government securities (G-Secs) with a 10-year
What is Operation Twist?20 Dec, 2019Operation Twist is the name given to a monetary policy tool that the Jerome Powell-led US Federal
The method was later adopted by several other central banks
Why this move by RBI?20 Dec, 2019Economists have been expecting the central bank to launch this special manoeuvre so that rate cuts by it
since February this year could lead to a commensurate drop in the rate of interest in the economy
Although RBI has cut interest rate five times this year by a total of 135 basis points, the yield on the 10-year G-Secs has come down by
Even less has been the drop in rate of interest that banks charge to their borrowers
So, how will it work?20 Dec, 2019On December 23, RBI will buy 10-year GSecs worth Rs 10,000 crore and, on the same day, it will also sell
one-year bonds of four varied tenures worth Rs 10,000 crore in all
Since the price of a bond and the yield on it move in opposite directions, buying of a bond pushes up its price and pulls down the yield
to flattening of the curve, whereby long bonds should rally for some time
Dwijendra Srivastava, CIO- fixed income, Sundaram Mutual Fund, if RBI keeps on doing such OMOs as per their pattern, it may continue to
on December 23 when RBI will be conducting a special open market operation (OMO), similar to the 'Operation Twist' carried out in the United
States near the start of the decade.
RBI in a release on Thursday said that on a review of the current liquidity and market situation and an
assessment of the evolving financial conditions, it has decided to conduct simultaneous purchase and sale of government securities under
Open Market Operations (OMO) for Rs 10,000 crore each on December 23.