Mumbai: The Reserve Bank of India ( RBI ) again bought more bonds than it sold in the second round of Operation Twist , which was launched on Monday to address liquidity issues and lower long-term bond yields.The central bank had announced a simultaneous sale and purchase of bonds under a special open market operation (OMO) for Rs 10,000 crore for Monday. Auction results indicate that while the central bank bought 10-year bonds worth Rs 10,000 crore, it managed to sell one-year short-term bonds totalling Rs 8,501 crore.In the first round of the Operation Twist last week, RBI bought a net of Rs 10,000 crore of 10-year bonds, while it sold one-year short term bonds to the tune of Rs 6,825 crore.“Possibly, they don’t want to hike the short-term rates. It seems like they do not want to suck out liquidity from the market. The idea is to control the long-term yield,” said Dwijendra Srivastava, CIO-fixed income, Sundaram Mutual Fund.“There could be a series of such operations, rather than the two we already saw. It is hard to predict though,” said Srivastava, adding that the central bank could sell 5-year or 7-year bonds as well instead of the 10-year bonds if it comes up with more such rounds.With banks passing on only a small part of rate cuts, RBI has been forced to think of unconventional ways to lower rates.With the benchmark 10-year G-Sec yield at an elevated level for quite some time, despite a series of rate cuts by the central bank, economists believe this special move could help transmission of rates in the economy.RBI also announced that on January 3 it will sell five dated government’s securities -- 6.17 per cent 2021, 7.27 per cent 2026, 6.45 per cent 2029, 7.62 per cent 2039, and 7.63 per cent 2059 for a total of Rs 16,000 crore.The government will have the option to retain additional subscription up to Rs 1,000 crore each against any one or more of the above securities.

Source: Economic Times December 30, 2019 13:49 UTC