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Two-way OMO plan set to keep yields capped

DNMUM402519 | 12/7/2017 | Author : Manju AB | WC :517

Trading at 7.07% earlier, yields dropped to 7.03% post RBI action on rates

Mumbai: Reserve Bank of India (RBI)’s plans to have a two-way open market operations (OMO) set a small rally in the government bonds on Wednesday. The 10-year benchmark government bond ended the day at 7.03% lower than the preceding close of 7.06%. Just before RBI’s policy announcement, they were trading at 7.07%.
A two-way OMO is when the central bank is ready to sell or buy back bonds from the banks to either suck out or release liquidity into the banking system.
“It is heartening to note RBI has also communicated greater clarity on the liquidity framework indicating that it is ready to deploy both short-term and durable tools to absorb or inject liquidity as the need arises,” Chanda Kocchar, managing director and CEO, ICICI Ban
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