The Reserve Bank of India (RBI) on Thursday bought Rs 26,779 crore of the benchmark 10-year bond at 5.99 per cent as part of the third tranche of the G-Sec Acquisition Programme (G-SAP 1.0), under which it bought Rs 40,000 crore on Thursday.
The decision to buy the paper at 5.99 per cent — the cut-off yield for the 10-year paper, which was trading above 6 per cent earlier in the day — is yet another instance of how the central bank wants to keep a lid on long-term interest rates and ensure the yields on the benchmark paper move in a tight range, preferably below 6 per cent.
The cut-off rate flies in the face of RBI governor Shaktikanta Das’s assertion there was nothing “sacrosanct” about the 6 per cent level. Before the auction, the 10-year security had hit a high of 6.07 per cent,though later it settled at 6.01 per cent.
With this purchase, the RBI is estimated to hold more than Rs 81,000 crore of the 10-year bonds in the market, or around 77 per cent of the paper in the market, which could help the yields to stay range-bound.
At the auction, the central bank purchased Rs 1,914 crore of the 7.17 per cent 2028 bond and Rs 5,882 crore of the 6.64 per cent 2035 bond. The RBI also bought state development loans of Rs 5,425 crore.
Bond yields had inched up after the finance minister announced a huge Rs 12 lakh crore borrowing programme in the current fiscal. However, they have cooled down from the higher levels because of the various steps taken by the RBI.
Stocks, rupee fall
Domestic equity benchmarks retreated for the second straight session on Thursday, mirroring weakness in global markets after the US Federal Reserve surprised investors by signalling faster-than-expected rate hikes.
A sharp drop in the rupee — which plunged 76 paise against the dollar — also sapped risk appetite, traders said.
The 30-share BSE Sensex ended 178.65 points, or 0.34 per cent, lower at 52323.33. The broader NSE Nifty declined 76.15 points, or 0.48 per cent, to 15691.40.
At the interbank forex market, the rupee opened weak at 73.65 against the US currency, then lost further ground and finally closed at 74.08, showing a fall of 76 paise over its previous close.
