RBI’s surprise cancellation of an open-market debt sale last month was a rare piece of good news. Photo: MintMumbai: For traders in rupee sovereign bonds, the most important factor to watch out for in the Reserve Bank of India’s (RBI) policy outcome on Wednesday is its stance on liquidity management. The central bank’s surprise cancellation of an open-market debt sale last month was a rare piece of good news in a market that’s been battered by concerns about rising inflation and worsening public finances. “OMO sales were the biggest and most unexpected development this year, and to an extent responsible for the sharp rise in yields.”Sovereign bonds due in a decade capped a fourth straight monthly loss in November. Excess liquidity with banks—the biggest holders of rupee sovereign debt—is down to Rs69,800 crore as of Thursday, from a peak of more than Rs5 trillion in March, according to Bloomberg Intelligence India Banking Liquidity Index.

Source: Mint December 05, 2017 08:48 UTC