The Reserve Bank of India (RBI) will buy government securities worth Rs10,000 crore on Friday, a development that has surprised the market, which believes it may be aimed at helping banks book gains or
reduce accounting losses after a recent slide in prices.
The move could also be to prevent liquidity tightness in the system ahead of next financial year's first bond auction of Rs18,000 crore scheduled next week, which also coincides with three holidays and the beginning of a new fiscal.
Securities maturing in 2017, 2018, 2021 and 2022 are to be bought back in the so called open market operations (OMO). When the central bank buys bonds, prices rise and yields fall. This results in notional or actual gains for bond holders. Prices and yields move in opposite direction.
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reduce accounting losses after a recent slide in prices.
The move could also be to prevent liquidity tightness in the system ahead of next financial year's first bond auction of Rs18,000 crore scheduled next week, which also coincides with three holidays and the beginning of a new fiscal.
Securities maturing in 2017, 2018, 2021 and 2022 are to be bought back in the so called open market operations (OMO). When the central bank buys bonds, prices rise and yields fall. This results in notional or actual gains for bond holders. Prices and yields move in opposite direction.
....more info