HALISTER1: India Bond Buyback Doesn’t Materially Differ From OMOs: BofAML

India Bond Buyback Doesn’t Materially Differ From OMOs: BofAML

(Bloomberg) -- No material difference between RBI’s OMO purchases and a govt buyback that should worry the market as both are injections of durable liquidity, Indranil Sen Gupta, India economist at Bank of America Merrill Lynch, writes in note
  • Both generate excess demand in the govt bond market by lifting papers from market players
  • Govt buys back bonds at shorter-end so it impacts the yield curve more than OMOs, but the effect is temporary
  • To reach neutral money-market liquidity, RBI likely would have to do 2t rupees of OMOs in FY17 and 2.5t rupees in FY18; if govt buys back paper maturing in FY18 now, the RBI will have to OMO that much more in FY18 unless FX inflows pick up
  • NOTE: Govt to buy back 150b rupees of bonds maturing in 2017 today; earlier bought back 184.6b rupees of bonds in October
  • NOTE: RBI has added 1.1t rupees via OMOs since the start of the financial year in April to move market liquidity to neutral
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Indranil Sengupta (Bank of America Corp)

To de-activate this alert, click here

UUID: 7947283