India’s central bank on Tuesday advanced plans to buy 1 trillion rupees ($10.9 billion) of bonds in two tranches by January 29 and February 5, instead of the previously announced February 5 and 12.
The move follows a surge in Indian government bond yields earlier in the day, which pushed the benchmark yield to a near 11-month high, pressured by heavy state borrowing and tight system liquidity.
The two open market bond purchase auctions of 500 billion Indian rupees each are part of a broader set of measures unveiled by the Reserve Bank of India last week to inject more than $23 billion of liquidity into the banking system. The bank plans to do this through a combination of bond purchases, buy/sell FX swaps and repo operations.
India’s RBI taps $2 billion-plus FX swaps to blunt liquidity hit from spot intervention, bankers say
The RBI bought 3 trillion Indian rupees of bonds during December-January, boosting the note-purchase tally for the fiscal year to a record 5.7 trillion Indian rupees.
Under Governor Sanjay Malhotra, the RBI has stepped up liquidity injections over the past year to reinforce its rate cuts and to manage the impact RBI’s market interventions to support the rupee have on banking system liquidity.
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