RBI plans another ‘twist’ with Rs 10,000 crore

Mumbai: North Block’s money manager would persist with its efforts to lift India’s sagging short-term rates toward keenly tracked policy gauges, it was evident on Monday, with the latest tranche of ‘Operation Twist’ capping off an eventful trading session that saw the rupee vault to its highest in about a year.

The central bank said that it will buy Rs 10,000 crore worth of long-term government bonds and sell a similar quantity of shorter duration papers.

“On a review of current liquidity and financial conditions, the Reserve Bank of India has decided to conduct simultaneous purchase and sale of Government securities under Open Market Operations (OMO) for an aggregate amount of Rs 10,000 crore each on February 25,” the central bank said in a release.

While the RBI will buy three sets of securities maturing in 2025, 2029 and 2033, it will sell two series of bonds maturing by February next year.

The central bank has been trying to rationalize yields with short term money market rates yielding well below the effective policy benchmark – reverse repo at 3.35 per cent.

The weighted average tri-party repo yielded 3.03 per cent compared with 3.07 per cent last Friday. The interbank call money was at 3.25 per cent on Monday versus 3.31 per cent in the previous trading day. The benchmark yield was about three basis points higher at 6.02 per cent.

The announcement came on a day the rupee surged to 72.68 to a dollar, climbing to levels not seen after February 2020. The weakening dollar and undiminished fund flows into surging equities triggered a rally in the rupee, underscoring India’s relative allure vis-a-vis competing economies.

To be sure, gains for the rupee may have been tempered by late intervention from the central bank, dealers said.

“Speculative bets significantly rose in the offshore currency derivative market due to rising forward premium,” said Anindya Banerjee, currency analyst at Kotak Securities. “The central bank is suspected to have bought dollars in the forwards changing dynamics in the overseas market.”

Overseas traders were seen selling dollars in the derivative market, known as non-deliverable forwards (NDF). Foreign portfolio investors Monday invested a net of Rs 1,234 crore in local equities, show provisional data from BSE.

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