10-year bond yield slumps 13 bps after RBI’s OMO announcement

Mumbai: The government 10-year bond yield on Monday tumbled nearly 13 basis points, declining for the fourth straight session, after the Reserve Bank of India (RBI) announced open market operations (OMO) next week.

 

At 9.15am, the 10-year bond yield stood at 7.609%, down 12.90 basis points, from its previous close of 7.728%. Bond yields and prices move in opposite directions.

 

RBI on Friday said that it will buy government bonds worth up to Rs10,000 crore on 17 May. The purchase of securities will be made under the central bank’s open market operations (OMOs). The decision is based on the “assessment of prevailing liquidity conditions and also of the durable liquidity needs going forward”.

 

“We believe this announcement should be seen as a positive surprise by the bond market as it comes earlier than expected and especially amid liquidity surplus conditions”, said Vivek Rajpal, analyst at Noumura Research, in a 5 May note.

 

The move will bring some relief to the bond market which is reeling under the pressure of rising yields despite a slew of regulatory measures.

 

Meanwhile, the Indian rupee weakened past 67-mark to hit a near 15-month low against the US dollar as foreign investors continued to liquidate in local equity and bond markets.

 

At 9.23am, the home currency was trading at 67.08 against US dollar, down 0.23% from its previous close of 66.87. The currency opened at 66.82 and touched a low of 67.09—a level last seen on 20 February 2017.

 

Since January, the rupee has weakened 4.4%, while foreign investors have bought $1.12 billion and sold $2.05 billion in equity and debt markets, respectively.livemint