The result of the auctions will be announced on the same day and successful participants are required to ensure availability of funds or securities in their current/SGL accounts, as the case may be, by noon on September 11.
The auctions would be conducted on August 27, 2020 and September 03, 2020, the RBI said.
The RBI conducts operation twist to manage yields in the bond market
In the case of other central banks which implemented OT or LTRO kind of operations, these decisions were taken by the main interest rate body.
If the inflation remains high, the central bank may stay on hold for a prolonged period. Coupled with likely high government borrowing, bond yields could rise further, no matter what RBI does.
So far, in three tranches of 'Operation Twist', the RBI has bought bonds worth Rs 30,000 crore and sold Rs 25,326 crore worth of securities.
RBI releases minutes of December MPC review meeting, RBI Governor calls for coordinated policy measures to revive growth
The repo rate currently is at 5.15 percent and the 10-year G-Sec yield was trading ~6.75 percent in pre-announcement of ‘Operation Twist. This could be one of the key reasons behind the move.
‘Operation Twist’ is when the central bank uses the proceeds from sale of short-term securities to buy long-term government debt papers, leading to easing of interest rates on the long term papers.
Gokarn feels that government and RBI should not ignore rating downgrade risks.
The Federal Reserve will buy a total of USD 600 billion of bonds under its newest stimulus program, known as QE3, and is likely to buy Treasuries outright after its "Operation Twist" stimulus ends in December, according to a Reuters poll of economists on Friday.
While some Washington leaders demanded Tuesday that the Federal Reserve come through with more stimulus, the reality could be that it has run out of ways it can help.
Three top Federal Reserve policymakers on Monday laid the groundwork for a third round of bond purchases, saying the US recovery was weak and unemployment far too high.
Uncertainty about US fiscal policy, Europe's sovereign crisis and slower global growth have turned the US economy into what feels like a slow-moving zombie.
With bond yields and mortgage rates already at historic lows, the Federal Reserve's move to prolong the shelf life of Operation Twist is unlikely to do much to lower US interest rates.
Indian equities pared losses in the last couple of hours of trade as both the BSE Sensex and NSE Nifty closed marginally lower as compared to more than 1% fall since early trade on Friday.
US Federal Reserve policymakers still see a "pretty high hurdle" before they would unleash a third round of quantitative easing, or QE3, a top Fed official said on Friday.
Paul Edelstein, director-financial economics at IHS Global Insight says, the Fed is trying to keep their powder dry to see if some of the downside risks start to turn up in the jobs numbers and inflation numbers.
Kevin Logan, chief US economist at HSBC says, the FOMC is quite concerned about the state of the labour market. "Job growth has slowed down quite rapidly in last four months. If we don‘t see drop in unemployment rate in next few months, we may get a QE programme later this year," he adds.
Alroy Lobo of Kotak AMC believes global events are likely to determine the market direction ahead, with issues in the Eurozone remaining the key overhang.
Global markets were closing watching the Federal Reserve's meeting and were anticipating a big liquidity boost. The Fed however, said that it was extending its Operation Twist program by buying USD 267 billion in longer-dated securities by the end of 2012.
The Federal Reserve move to restrict monetary stimulus to the Operation Twist amount and not include QE has eased commodity prices and resulted in sharp fall in Brent Crude, which is positive for bonds, says Mohan Shenoi, Kotak Mahindra Bank.
Is an extension of Operation Twist good for Indian equities?
The Federal Reserve on Wednesday extended its monetary stimulus to a US economic recovery that looks at risk of stalling, renewing its effort to depress borrowing costs by selling short-term bonds to buy longer-dated ones.
Geoff Lewis of JPMorgan Asset Management highly doubts that the Fed will go for a third round of QE as he believes the US economy is enjoying a slow recovery.