10-year benchmark government bond yield rises over 6-month high on OMO sales announcement

During policy announcement, the RBI Governor Shaktikanta Das said the central bank will consider open market operations (OMO) sales to manage liquidity.

The yield on India's benchmark 10-year government bond rose 15 basis points (Bps) in the afternoon trade, which is over six-month high after the Reserve Bank of India (RBI) said they may consider Open Market Operations sales to manage liquidity.

The decision was part of RBI's bi-monthly Monetary Policy meeting. The current yield on the 10-year government bond was highest since March 21, 2023, according to the Bloomberg data.

One basis point is one hundredth of percentage point.

The yield in 10-year benchmark 7.18 percent 2033 bond was trading at 7.3645 percent on 2:50 PM, as against 7.2140 percent close on the previous trading session.

"It is very clear and came as a warning that RBI wants to do OMO sales to keep tight liquidity (stance to keep tight liquidity situation) and to control inflation as they expect headline inflation to continue higher than expected," said Venkatakrishnan Srinivasan, founder and managing partner, Rockfort Fincorp.

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Srinivasan further added that clearly bond market was not expecting this. 10 year gsec yields already moved up by 5-7 bps," said.

During policy announcement, the RBI Governor Shaktikanta Das said the central bank will consider open market operations (OMO) sales to manage liquidity.

"We may have to consider OMO sales to manage liquidity on consistent with stance of monetary policy," Das said.

OMO is a term which refer to purchase or sales of government securities in the open market by the Central bank.

Further, Das added that the timing and quantum of such operation will depend upon evolving liquidity conditions.

Additionally, governor said OMO sales will be done through auction process, and timing and quantum of such operation will depend upon evolving liquidity conditions.