RBI Announces Special OMO: The Reserve Bank of India (RBI) has announced that it will buy government bonds worth 10 thousand crores on 25 February through Open Market Operations (OMO). RBI is about to buy bonds to support liquidity in the market. On February 25, RBI will buy government bonds and will sell to retail investors on the other side. The Reserve Bank says that this decision has been taken in view of the current liquidity and financial condition. Earlier, on 10 February, the central bank had bought a bond worth Rs 20,000 crore.
Actually, it is providing funds to the RBI government by buying bonds. Please tell that RBI Governor Shaktikanta Das had said recently that he can provide 12 lakh crore rupees fund to the government. This will be done to support the government’s borrowing program. According to Bloomberg, a government source has informed that the RBI will continue this support even further and the Central Bank’s plan is to buy 3 lakh crore ($ 4100 million) bonds in the next financial year. After such reports in the market, the 10-year bond yield has also decreased and it is around 6 percent.
What does it mean for investors?
Experts say that while these measures by RBI will increase liquidity, it will help to keep the bond market stable. If the 10-year bond yield decreases, the bond market will gain momentum. The introduction of liquidity in the system will help in maintaining the funding channel operation and will also help in reducing financial clutter. Equity will not only benefit the debt market.
What are government bonds?
A government bond is a debt instrument that is traded and traded. The central and state authorities issue them. Central or state governments often require funds. Sometimes liquidity causes a crisis. In such a situation, they issue such bonds to raise money from the market. These are issued for both short and long term. Short term security is called Treasury Bills which are issued for a period of less than 1 year. If such security is issued for a period of more than one year, it is called a government bond.
These bonds are issued by the government, so there is no risk in them. Such investors should invest in government bonds which are looking for traditional investment options like FD. Looking forward to better returns in government bonds. However, the quality of the paper must be seen before investing.