INSUBCONTINENT EXCLUSIVE:
The central bank Thursday announced yet another instalment of `Operation Twist' to help reduce yields on longer tenor sovereign debt, which
now carries higher costs despite a 75-basis-point cut in interest rates late last month.
The central bank has proposed to buy - and sell -
government bonds worth Rs
10,000 crore under each head
It will buy longer tenor bonds with 6-10 year maturities while simultaneously selling shorter duration papers maturing between June this
The auction is scheduled to take place next Monday.
In an unscheduled policy, the Reserve Bank of India (RBI) cut the repo - the rate at
which banks borrow short-term money - by 75 basis points late March
A basis point is 0.01 percentage point.
Even though the benchmark yield dipped to 5.98%, it rebounded past 6.4% amid fiscal concerns
Bond yields and prices are inversely correlated.
The gauge dropped 20 basis points, the most since March 27, to 6.02%, after the Reserve
Bank of India announced its latest instalment of Operation Twist.
After the global financial crisis in 2008, when yields did not budge much
despite increasing liquidity, the then Federal Reserve Chairman Ben Bernanke purchased bonds at the longer end, pushing yields down and
raising rates in the near term
Fixed Income, IDFC AMC.
The RBI last used this tool in January
It first used this measure in December, which helped ease yields by about 30 basis points from a five-month high of 6.80%, according to
It had also introduced European Central Bank-like cash boost to banks.
This article first appeared/also appeared in
https://economictimes.indiatimes.com/markets/stocks/news/heres-what-you-should-know-about-rbis-operation-twist/articleshow/75327326.cms
