Liquidity ops not for managing bond prices

The liquidity operations conducted by the Reserve Bank of India (RBI) is not aimed at managing prices of government bonds but to drive its monetary policy goals, to manage money supply in the system, said RBI deputy governor Viral Acharya.

Speaking at the sixth bi-monthly monetary policy press meet on Wednesday, Acharya said, “Except in rare, extraordinary economy-wide circumstances the goal of RBI’s liquidity operations is not to manage directly the prices of any long-term asset market. In the present circumstances, economic analysis has been referring to froth chasing one asset market and they’re being tight liquidity in another.” Since July 2017, yield on 10-year government bond has risen by about 120 basis points to 7.6 per cent.

Falaknaaz Syed