(FE)
The Reserve Bank of India (RBI) has commenced something that is akin to the famous “Operation Twist” conducted by the US Federal Reserve by deciding to buy the long-tenor 10-year benchmark bonds worth Rs. 10,000 crore and selling four short-dated securities worth the same amount under open market operations (OMOs).
On Thursday, the RBI said it would be buying the 6.45% yielding notes maturing in 2029 — the benchmark bonds — and would be selling four papers maturing in 2020. The OMOs would be conducted on Monday. The step is liquidity neutral — meaning the OMOs would not be adding any further liquidity to the system that is already flush with excess liquidity to the tune of over Rs. 2 lakh crore. The simultaneous purchase and sale of securities would also help in flattening the steep yield curve — where long tenor yields have been high and short-term yields have been low.
