The government is expected to raise Rs 1,00,000 crore of additional taxes under the Income Disclosure Scheme II (IDS II), which in turn will help in containing the 2017-18 fiscal deficit, says a report.
The 10-year benchmark yield is likely to trade in a range of 6.73-6.78 percent today, says Ajay Manglunia of Edelweiss.
As part of the OMOs, RBI will purchase government securities maturing in 2017 (bearing interest rate of 7.46 percent), 2022 (8.15 percent), 2025 (8.2 percent), 2017 (8.6 percent) and 2030 (7.88 percent).
Vivek Rajpal, rates strategist at Nomura India, says: "We will head into the new fiscal year with a total core system liquidity deficit of neutral level if we get one more OMO, which effectively means that liquidity worry will go away in the month of April."
There is a need for investment lift-off and for that to happen, the government will have to mobilise the savings in the economy and make it available to the private sector, says Edward Teather, senior economist Asean & India of UBS Investment Bank
Exactly a year ago, RBI began its rate cutting spree. But the government bond yields remain stubbornly at 7.8 percent -- exactly where they were before the cumulative 125 basis points repo cuts.
Vivek Rajpal, rates strategist at Nomura India says, there is likely to be additional OMO of Rs 30000 crore this fiscal
Credit Suisse thinks even if the pressure on liquidity were to sustain, RBI will prefer to address it with Open Market (OMO) Purchases rather than CRR
The central bank would decide on the quantum of sales of individual securities, it said. RBI would have option to accept bids for less than the aggregate amount of Rs 10,000 crore.
Manish Wadhawan, MD & HD - Interest Rates, HSBC feels the RBI is trying to inject some kind of permanent liquidity into system because OMO is a manifestation of that. RBI has announced OMO for bond buyback.
Ahead of WPI data release and weekly scheduled auction today, the range for the 10-year yield is seen between 8.95-9.05 percent, says Mohan Shenoi, Kotak Mahindra Bank.
Jayesh Mehta believes there is lack of fresh buyers for bonds and people are also reducing their positions ahead of the US data on Friday, which if disappoints, may result in the 10-year bond yields crossing 9 percent.
Gilts are expected to consolidate gains with the OMO purchase scheduled today and on anticipation of more purchases lined up in the coming weeks, says Ajay Manglunia, Edelweiss.
ICRA expects the RBI to intervene and address tightness in systemic liquidity in the next quarter through open market operations (OMOs) as the Central Bank ruled out any further relaxation in the daily CRR requirement.
Due to heavy supply in primary auctions this week, the 10-year bond could see selling pressure at higher levels, says Sandeep Bagla, ICICI Securities.
Due to squeeze in liquidity high lending rates will eat away benefits of monsoon. Therefore, GDP growth will depend a lot upon when the monetary policy is dismantled, says Indranil Sengupta, Chief Economist India, BofA ML.
Recent smart outperformance by bond yields post RBI's OMO announcement on August 21 will provide a short term cap on the yield movement, says Dhawal Dalal, DSP BlackRock Invst Managers.
According to Nirmal Bang, rupee may trade in a tight range of 63.10-63.50 during the day. The prospects of some hints of QE tapering in today‘s FOMC minutes will cap any significant gains in the rupee, says the research firm.
BSE Bankex rallied more than 5 percent to 11041.46, continuing previous day's upmove as country's largest lender State Bank of India gained over 5 percent. Private sector lenders ICICI Bank, HDFC Bank and Axis Bank were up 3-6.5 percent.
Continued OMO purchases would act as a cap in long bond yields, says Ramanathan K, CIO, ING Investment Mgmt.
Apollo Tyre | Fortis Healthcare | Financial Technologies | MCX India and Federal Bank are stocks, which are in the news today.
The market is now expecting measures like a CRR hike and OMO (open market operations) by the RBI. In case an OMO is not announced, bonds could rally tomorrow. The range for the 10-year yield is seen between 8-8.10 percent, says Sandeep Bagla, ICICI Securities.
Agam Gupta- Managing Director, Head of FXRC (Foreign Exchange Rates & Credit Trading), South Asia, Standard Chartered Bank told CNBC-TV18 that there is no real demand for bonds at the market yields and absorbing Rs 12000-15000 crore is a difficult task.
"You (RBI) announce tightening measures 72 hours ago and then in 30-odd hours you chicken out! You reject a T-bill auction and allow Rs 11,000 crore of liquidity into the system. You tightened it in the first place and then today another rejection," a flabbergasted CNBC-TV18's Latha Venkatesh questions.
Market was in a big shock yesterday when the Treasury bill auction of Rs 11,000 crore was rejected, which basically means that liquidity in the system has increased by Rs 11,000 crore.