Experts in the Treasury market say that, since there is a wide license in the short term in the banking system, the demand to draw liquuidity in the VRR window is warm
Banks show a clear preference to extract permanent liquidity from the open market operation (OMO) of government values (G-SEC) that temporary liquidity through the auction of variable rate repos (VRR).
This is underlined by the fact that, although they made offers to attract funds that amount to a little twice the amount that the Bank of the Reserve of India (RBI) was willing to inject through OMO, the demand for funds at the variable rate of 43 days.
Against the notified amount of ₹ 40,000 million rupees in the purchase auction of OMO of G-SECS, the banks presented G-SEC that added ₹ 81,015 million rupees (nominal value). The Central Bank accepted offers for the notified amount, injecting ₹ 40,000 million rupees in the banking system.
However, at the 43 -day VRR auction, banks sought to obtain funds that amounted to only ₹ 25,731 million rupees against the notified amount of ₹ 1.50 Lakh Crore. The RBI accepted offers that add ₹ 25,731 million rupees to an average weighted average rate of 6.02 percent.
Large liquuidity in bank
Experts in the treasure market say that, since there is a wide liquuidity in the short term in the banking system, the demand for drawing liquuidity in the VRR window is warm. However, the banks are ready to sell G-SEC in the OMO purchase auction, since the injection of liquuidity is permanent.
V Rama Chandra Reddy, Chief of Treasury, Karur Vysya Bank, said that the lying auction of OMO purchases is one of the reasons why banks offer well in the primary G-Sec auction, which included the Soeign green bonus, adding ₹ 30., 000, 000
Madan Sabnavis, chief economist of the Banco de Baroda, said that the financial system seems to be in a comfort area where there is a surplus every day that has been overcome by the RBI that has the VRR auctions, which are not full of offer.
“A Question That Can Be Asked is Showd There Be Such Auccs? Our Sense is that the vrr auccs in a situation of surplus liquuidity is a Strong Signal Sent to the Market that the rbi Will enure that liquuidity is Never an Altue Ann This Altete Ann This. Istue Annot.
Meanwhile, the 10-year reference G-SEC (6.79 percent GS 2034) defrost approximately 2 basic points to close 6.37 percent on Thursday against the previous closure of 6.39 percent in the middle of a wide liquidity and an IDB Bid Bec auction.
Nuvama’s richness, in a report, said: “The 10 -year reference point (6.79 GS 2034) opened little to 6.39 percent despite a fall in treasure yields during the night (after the results of the weekly auction better than expected).
“The yields quickly fell into the morning session and negotiated with a descending bias during the day, also helped by the continuous force in the rupee.”
Decrease in bond yields
Sabnavis emphasized that what is surprising about the G-SEC market is the performance of decline bonds.
“The 10-year yield is now approximately 6.38 percent and the level of 6.30-6.35 percent will be tested. This will be the route forward while the liquidness is in surplus.
“And why should that not be? Incrementary credit tends to be negative in April and is normally withdrawn after June,” he said.
He pointed out that government’s cash balances are low, giving an indication that budgetary disbursements will be well implemented in time. This is also reflected in lasting liquidity. SDF balances (permanent deposit installation) are close to ₹ 2 Lakh Crore, indicating a comfortable phase for the market.
Posted on April 17, 2025