Operation Twist Awaited

Yields are higher, bonds tracking a move in US Treasuries post FOMC. Market participants today look ahead to Operation Twist, the bank has reduced the size of the operation to INR 100bn on both purchases and sales, this compares to purchases of INR 200bn last week, and sales of INR 150bn. Details of today's operation below.

• To Purchase: 5.15% 2025 bond, the 5.85% 2030 bond, and the 7.95% 2032 bond
• To Sell: 8.35% 2022 bond and the 8.15% 2022 bond
• The RBI has augmented its intervention with Operation Switch, where the bank directly swaps shorter bonds into longer bonds, which was conducted on Monday this week.
• As a note issuance in the last fiscal year was around INR 13tn, while the next year is expected around INR 12tn. The RBI conducted OMO's to the tune of INR 3tn in the current fiscal year.
• RBI Governor Das said the bank was committed to keeping its easy monetary stance for some time, and said the RBI would continue to support the bond market, pointing out reduced borrowing and equal or increased purchases. In the interview with Economic Times Das was positive on the economy and said that large capital expenditures announced in the budget would be supportive of growth.
• Foreign funds bought a net $84.7m in Indian bonds yesterday, the second day of buying after almost uninterrupted selling since mid-Jan, domestic managers have turned sellers of bonds due to market volatility. SBI is reportedly allocating funds to overnight repo markets and reducing duration in debt funds.
• Fig.1: Indian Bonds Foreign Inflows

Source: MNI/MOF