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Bond markets seemed convinced with the central bank assurance that surplus liquidity will remain, ensuring low yields. Shaktikanta Das also signalled that he would use Market Stabilisation Scheme and Standing Deposit Facility if its forex intervention goes beyond unspecified tolerable limits.
“The Reserve Bank, on its part, stands ready to undertake further measures as necessary to assure market participants of access to liquidity and easy financing conditions,” said Das announcing the bi-monthly policy.
“The various instruments at our command will be used at the appropriate time, calibrating them to ensure that ample liquidity is available to the system. Instruments like OMO purchases, operation twists and reverse repos will continue to be used,” he said.
The 10-year government bonds with larger outstanding yielded three basis points lower, pushing prices up. The gauge closed at 5.90 percent Friday.
The central bank promised to respond to global spill-overs to secure domestic stability with liquidity management operations.
“Our paramount objective is to support growth while ensuring that financial stability is maintained and preserved at all times,” the governor said.
This financial year, the central bank has conducted open market operations and Operation Twist, both aimed at infusing cash into the system through bond purchases and elongating bond maturities.
Market Stabilisation Scheme is aimed at sucking out excess liquidity that any RBI bond or dollar purchase programmes have likely created.
The RBI issues a deposit certificate to banks parking surplus money through the Standing Deposit Facility, a deposit window where the central bank need not offer government securities against banks’ excess money unlike the reverse repo plan.
The measures taken by the Reserve Bank over the year gone by have also resulted in significant moderation in the structure of interest rates across the spectrum, narrowing of risk spreads, and a record issuance of corporate bonds, the RBI said.
The spread of AAA-rated three-year corporate bond yields over sovereign yields of corresponding maturity fell to 17 basis points on November 27 from 60 bps on October 8 earlier this year, show central bank data.
The spreads on lower rated corporate bonds also moderated significantly during the same period: by 34 bps each for AA-rated three-year bonds and BBB- rated three-year bonds.
“Corporate bond spreads have, in fact, narrowed to pre-pandemic levels across the term structure,” RBI governor said, hinting at lower funding costs for companies.
The yield on AAA-rated 5-year corporate bonds declined to 5.59 percent on November 27 from 5.93 percent on October 8, this year.
“The easing of financing conditions is, in fact, preparing the ground for strengthening the nascent signs of recovery that have become visible in the second half of 2020-21,” Das said.
“The Reserve Bank, on its part, stands ready to undertake further measures as necessary to assure market participants of access to liquidity and easy financing conditions,” said Das announcing the bi-monthly policy.
“The various instruments at our command will be used at the appropriate time, calibrating them to ensure that ample liquidity is available to the system. Instruments like OMO purchases, operation twists and reverse repos will continue to be used,” he said.
The 10-year government bonds with larger outstanding yielded three basis points lower, pushing prices up. The gauge closed at 5.90 percent Friday.
The central bank promised to respond to global spill-overs to secure domestic stability with liquidity management operations.
“Our paramount objective is to support growth while ensuring that financial stability is maintained and preserved at all times,” the governor said.
This financial year, the central bank has conducted open market operations and Operation Twist, both aimed at infusing cash into the system through bond purchases and elongating bond maturities.
Market Stabilisation Scheme is aimed at sucking out excess liquidity that any RBI bond or dollar purchase programmes have likely created.
The RBI issues a deposit certificate to banks parking surplus money through the Standing Deposit Facility, a deposit window where the central bank need not offer government securities against banks’ excess money unlike the reverse repo plan.
The measures taken by the Reserve Bank over the year gone by have also resulted in significant moderation in the structure of interest rates across the spectrum, narrowing of risk spreads, and a record issuance of corporate bonds, the RBI said.
The spread of AAA-rated three-year corporate bond yields over sovereign yields of corresponding maturity fell to 17 basis points on November 27 from 60 bps on October 8 earlier this year, show central bank data.
The spreads on lower rated corporate bonds also moderated significantly during the same period: by 34 bps each for AA-rated three-year bonds and BBB- rated three-year bonds.
“Corporate bond spreads have, in fact, narrowed to pre-pandemic levels across the term structure,” RBI governor said, hinting at lower funding costs for companies.
The yield on AAA-rated 5-year corporate bonds declined to 5.59 percent on November 27 from 5.93 percent on October 8, this year.
“The easing of financing conditions is, in fact, preparing the ground for strengthening the nascent signs of recovery that have become visible in the second half of 2020-21,” Das said.
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