Bond Yields Hit 10-Week Low After RBI Announces Rs. 10,000 Crore Bond Purchase

The yield on 10-year government bonds has fallen to 10-month low of 7.723% in Wednesday's early morning session after the Reserve Bank of India announced open market operation purchases. On Tuesday, yield on 10-year bond closed at 7.865%. Bond prices and bond yield share inverse relationship i.e. when bond yield rises, bond prices fall.

On the assessment of liquidity conditions, the apex bank RBI announced OMO operation on Thursday worth Rs. 10,000 crore of bonds. This will be the third OMO by the RBI this earlier. Earlier, the OMO announcement was made in Mid-May and the second one in Mid-June.

In a release to its investors, RBI said, "Based on an assessment of prevailing liquidity conditions and also of the durable liquidity needs going forward, the Reserve Bank of India has decided to conduct purchase of government securities under Open Market Operations".

The bond prices surged for the second straight session after a decline in the price of crude oil eased concerns around inflation. Lately, the crude oil prices have witnessed a sharp reduction as it is suggested that Trump administration is likely to take a softer stance on economies that import their oil requirement from Iran.

Meanwhile the Indian currency was trading lower at 68.56 against the dollar down by 0.15%. Other Asian currencies also traded lower after Jerome Powell was positive about the US economy as the outlook boosted the sentiment for the US dollar.

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