RBI to restart Operation Twist to manage yields

To sell, buy ₹10,000-cr. bonds each

April 23, 2020 10:21 pm | Updated 10:21 pm IST - Mumbai

The Reserve Bank of India (RBI) has announced simultaneous purchase and sale of government bonds in a bid to soften long-term yields. The central bank will buy ₹10,000 crore of bonds maturing between 2026 and 2030 and sell the same amount of T-bills.

“On a review of current and evolving liquidity and market conditions, the Reserve Bank has decided to conduct simultaneous purchase and sale of government securities under open market operations (OMO) for ₹10,000 crore each on April 27, 2020,” the RBI said on Thursday.

Such open market operations are known as ‘Operation Twist,’ which was used by the RBI in December last year for the first time.

Following the announcement, the yields on the 10- year bonds dropped by 20 basis points (bps).

The move will also aid monetary transmission by prompting banks to pass on interest rate cut benefits to their customers. The RBI had reduced key policy rate or the repo rate by 75 bps to 4.4% in the monetary policy review, announced in the last week of March.

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