RBI's ₹25,000 crore OMO sale draws ₹67,655 crore of bids
Victoria Shinder1 min readThe Reserve Bank of India sold the full ₹25,000 crore of government securities it offered in an open market operation on 28 September, according to the detailed result published by the central bank. Participants bid for ₹67,655 crore, about 2.7 times the notified amount. Settlement was on 29 September.
The sale covered six securities maturing between 2029 and 2032. Most of the accepted amount went into two 2032 bonds: ₹14,350 crore of the 6.54% GS 2032, against bids of ₹23,305 crore, with competitive bids at the cut-off price allotted 50%, and ₹6,450 crore of the 7.26% GS 2032, against bids of ₹24,095 crore. The four shorter bonds accounted for the rest: ₹920 crore of the 7.59% GS 2029, ₹610 crore of the 6.45% GS 2029, ₹1,350 crore of the 7.61% GS 2030 and ₹1,320 crore of the 5.85% GS 2030.
Weighted average yields rose with maturity, from 6.6594% on the 7.59% 2029 bond to 7.0895% on the 7.26% 2032 bond. The 6.54% 2032 bond sold at a weighted average yield of 7.0532% and a price of ₹97.75.
An OMO sale removes rupee liquidity from the banking system: buyers pay the central bank for the bonds. The auction follows a run of variable rate reverse repo operations through which the RBI has also been absorbing surplus funds, including overnight auctions announced on 28 and 29 September.
What it means
Demand was there at the price the RBI wanted: bids of 2.7 times cover and a full allotment mean the central bank did not have to accept higher yields to get the liquidity out. Concentrating the sale in 2032 paper puts the supply where it adds to longer-dated yields rather than at the short end, where the reverse repos already work.