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RBI to sell cash management bills for Rs 30,000 crore

Date: 03-01-2020
Subject: RBI to sell cash management bills for Rs 30,000 crore
The Reserve Bank of India (RBI) will raise Rs 30,000 crore by selling Cash Management Bills (CMB), or short-term sovereign papers, as the government will need funds to meet immediate debt obligations. The CMBs will mature on March 17.

The central bank will also buy longer maturity bonds while selling shorter duration papers for Rs 10,000 each, seeking to bring yields down in line with the policy rate.

“CMBs will help the government to meet immediate repayment requirements especially when the fisc is running in deficit," said Naveen Singh, head of trading at ICICINSE -0.40 % Securities PD.

"Traders expected the third instalment of Operation Twist, but the surprise was more securities on the buy side, which will make the yield drop more broad based instead of the market focusing only the benchmark paper," he said.

Government bonds worth Rs 61,000 crore came up for redemption Thursday when investors received the money back with interest, show data from RBI. Similar maturities are falling due next two weeks for Rs 74,000 crore.

Fiscal deficit, or excess of expenditures over revenues, pegged at 3.3 percent of Gross Domestic Product is likely to be breached for the financial year 2019-20.

This time, the central bank will buy three series of long duration papers maturing in the next four, six and nine years for Rs 10,000 crore and sell equivalent debt maturing this calendar year.

Mint Street first conducted such open market operation on December 19 last year. Since then, the yields declined 25 basis points pushing prices up. The benchmark gauge closed at 6.50% on Thursday.

Introduction of three series of long term bonds is likely to make the yield drops more secular, dealers said.

Source: economictimes.indiatimes.com

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