10-year bond yield hits 10-week low as RBI announces more OMO purchases
Mumbai: Yields on 10-year government bond on Wednesday hit 10-week low after the Reserve Bank of India announced open market operation (OMO) purchase. At 9.15 am, the 10-year bond yield stood at 7.723%—a level last seen on 10 May, from its Tuesday’s close of 7.865%. Bond yields and prices move in opposite directions. Late on Tuesday, RBI said it will buy Rs 10,000 crore of bonds via OMO on Thursday citing an assessment of liquidity conditions.
This is the third OMO announced so far this year. The first was announced in mid-May and second in mid-June.
“Based on an assessment of prevailing liquidity conditions and also of the durable liquidity needs going forward, the Reserve Bank of India has decided to conduct purchase of government securities under Open Market Operations” RBI said in a note to its investors.
This was the second session when the bond prices surged as a decline in crude oil prices eased concerns of inflation will quicken.
Crude oil prices have softened over the after US officials suggested the Trump administration will take a softer stance on countries that import oil from Iran.
“If this descent in crude sustains during the coming days, it may ease inflationary concerns and this might possibly translate into less hawkish commentary by the monetary policy committee”, said Edelweiss Financial in a note to its investors.
Rupee was trading little changed against US dollar. The currency was trading at 68.43 a dollar, up 0.03% from its previous close of 68.46.
Asian currencies declined after Federal Reserve Chairman Jerome Powell’s positive assessment of the US economy boosted the dollar.
Powell was generally upbeat on the prospects for the US economy and told a Senate committee the Fed will continue to gradually raise interest rates “for now,” suggesting it may reconsider its tightening path next year. However, he also warned that trade protectionism could hurt economic growth and potentially undermine wages.