RBI’s Rs 50,000 crore OMO sale gets bids worth Rs 66,590 crore

Mumbai: The central bank's first open market operation (OMO) sale of the year saw a stronger-than-expected response, with market participants placing bids worth ₹66,590 crore against the notified amount of ₹50,000 crore. The Reserve Bank of India (RBI) accepted bonds at yields higher than prevailing market levels, seeking to suck out excess liquidity.

Higher yields suggest a premium demanded from the investors. The OMO comes ahead of ₹28,000 crore weekly bond auction scheduled Friday by the RBI.

The 8.28% GS 2032 was the most in demand, with market participants bidding the highest at ₹19,700 crore, while the five-year 6.68% GS 2031 paper garnered bids of ₹7,970 crore.


"The yields were slightly higher than prevailing market levels and expectations, but the OMO was well subscribed. Since the sale was fully subscribed, it did not lead to any significant negative reaction in yields," said Alok Singh, head of treasury at CSB Bank.

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For example, the yield of the five-year paper closed at 6.78% on Thursday, while the cut off yield in the OMO was 6.90%.

The 6.79% GS 2029 three-year paper was taken at a cutoff yield of 6.70%, while it closed at 6.66%.

The RBI is conducting OMOs to absorb surplus system liquidity and align the weighted average call rate (WACR) with the policy rate. Selling securities in the OMO is one of the measures the central bank uses to drain excess liquidity in the banking system.

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Overall liquidity now stands at ₹7.37 lakh crore on September 16, while the next OMO sale of ₹25,000 crore will take place on September 21. The WACR is at 5.05%, and has been below the 5.25% policy repo rate since late July. The RBI will also conduct a 3-day variable rate reverse repo (VRRR) operation for ₹2.25 lakh crore on Friday.