The Reserve Bank Of India recently sold sovereign securities worth rupees 1,435 crores in the secondary market, clearing the sign of liquidity mobilisation.
Indian benchmark yields hit their highest level in the past two years, due to the sale of bonds in the recent auctions. Resulting in a rise of the 10-year-old bond yield of 6.59% of basis points. These yields are said to be the highest since the month of January 2020.
The bond sales in the secondary market may have been possible with the central bank’s baking system.
Madan Sabnavis, Chief Economist at CARE Ratings said, “Those secondary market on-screen selling by the central bank is indicative of liquidity normalisation.” He further quotes, “This helps cut surplus cash in the system. It also rationalises yield movements depending on which securities it is selling. This, in turn, aids check any sudden swing in rates aiding fiscal borrowings.”
RBI (The Reserve Bank Of India) has stated that this is the step for liquidity normalization. With an assurance of liquidity at the time of need.
Naveen Singh, the executive vice president and head of trading at ICICI Securities Primary Dealership Ltd, said that this would change the global perspective of the market and the market would stay away from any equilibrium. He added that, in the month of October and November the market was not as supportive and there could be changes seen while continuing the market.