“We can see from the amount offered that the response to the OMO has been good. Participants would be looking to sell held-to-maturity (HTM) books and book profits in the last quarter of the year,” said Gopal Tripathi, head of finance at Jana Small Finance Bank.
Indian government bonds took a downturn on Tuesday after Bloomberg Index Services postponed their inclusion in a global index, citing an ongoing review. This decision undermined market expectations of significant foreign inflows, impacting bond yields. Meanwhile, sovereign debt auctions and a significant swap of dollars and rupees by the RBI are also in the offing, amid broader geopolitical concerns.
The RBI will also conduct a dollar-rupee buy/sell swap for $10 billion on Tuesday. These liquidity measures are intended to return system liquidity to a surplus and contain the volatility of short-term financing rates. System liquidity showed a very mild surplus of ₹38,728 crore in January so far.
“Any surplus in the system will be used to meet other liquidity conditions of CRR and LCR.” said Rajeev Pawar, Head of Finance Department, Ujjivan Small Finance Bank.
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