RBI advances repurchase of bonds as yields spike

Mumbai: Govt bond yields jumped to an almost 11-month high as state borrowing and tight liquidity rekindled supply-glut fears, pushing the RBI to fast-track bond repurchases and roll out other liquidity measures. The benchmark 10-year 6.48% 2035 yield closed at 6.72%, up from 6.66%, its highest since early March.

Sell-off pressure forced an early start to open market operations. Two bond-purchase auctions totalling Rs 1 trillion will now run on Jan 29 and Feb 5, with Rs 50,000 crore each advanced from the earlier Feb 5 and Feb 12 schedule.

A 90-day variable rate repo of Rs 25,000 crore is also set for Jan 30, reversing on Apr 30. A $10 billion dollar-rupee buy/sell swap, slated for Feb 4 with a three-year tenor, aims to inject durable rupee liquidity of about Rs 90,000 crore.

Markets stayed under strain. States sold Rs 39,800 crore of bonds and plan record Rs 5 lakh crore borrowing in Jan–March. Ahead, an expected Rs 16 lakh crore–Rs 17.50 lakh crore gross borrowing plan for next year has kept supply fears high, even as liquidity stays tight and rate transmission stalls.