The Government Securities (G-Sec) market was buoyed on Thursday, the first trading session of the current financial year, due to the surprise RBI announcement that it will conduct four open market operation (OMO) purchase auctions of these Securities this month
Yield of the benchmark 10-year G-Sec declined 10 basis points, the sharpest single day fall in almost a year, with its price jumping 72 paise.
The auctions are expected to infuse liquidity aggregating ₹80,000 crore into the banking system, which had a surplus liquidity of ₹1,42,441 crore as of April 1, 2025.
Market players say that by keeping the system liquidity in surplus, the RBI is preparing the ground for a repo rate cut of 25 basis points and a change in monetary policy stance from neutral to accommodative.
Yield of the benchmark 10-year G-Sec (6.79 per cent GS 2034) closed at 6.4806 per cent (price: ₹102.17) against the previous close of 6.5823 per cent (price: ₹101.45).
“The surprise announcement of OMO purchase auctions of G-Secs has fueled this rally. After the Rupee appreciated above the 86 to the Dollar mark, market players thought the central bank’s action of selling Dollars and sucking Rupee liquidity is behind us and it will start buying Dollars, which will release liquidity into the system.
“So, when there is a big surprise announcement like OMO, there is a sharp reaction, leading to a substantial decline in yields,” said V Rama Chandra Reddy, Head-Treasury, Karur Vysya Bank.
The Reserve Bank of India will conduct OMO purchase auctions of G-Secs this month in four tranches of ₹20,000 crore each on April 3, April 8, April 22 and April 29 even as the system liquidity has turned into a surplus.
Reddy said, besides a repo rate cut and change in monetary policy stance, there is also a possibility of a cash reserve ratio cut at the upcoming bi-monthly monetary policy review.
Nuvama Wealth, in a report, said: “The 10-year benchmark opened sharply lower at 6.54% following RBI’s announcement of an OMO purchase…Yields fell further, and traded with a downward bias through the day, with a segment of markets positioning for a potential change in stance in the April policy meeting.”
Madhavi Arora, Chief Economist, Emkay Global Financial Services, said: “The OMO spree doesn’t seem to end…We’ve ended FY25 with a banking liquidity surplus (₹89,400 crore vs deficit of ₹2.4 lakh crore last week/March average deficit of ₹1.3 lakh crore). Massive RBI liquidity infusion (₹3.2 lakh crore durable addition) + month/year-end government spending and recent FPI Inflows have helped too.
“Going forward, 1QFY26 is poised for very comfortable liquidity, led by estimated Rs 2.8-3 lakh crore + RBI dividend by end-May; a sharp seasonal moderation in currency in circulation; and much lower seasonal net tax outflows and a more balanced borrowing calendar.”
