Business · India Bureau
Banks deploy massive liquidity at RBI's 29-day auction as yields climb
Banks absorbed ₹79,655 crore through the Reserve Bank of India's 29-day variable rate reverse repo auction, as benchmark bond yields continued their upward trajectory amid anticipated open market operations.
LSN India ·
The RBI's latest 29-day variable rate reverse repo (VRRR) auction drew bids of ₹79,655 crore against an offered amount of ₹2 trillion, reflecting sustained demand for short-term liquidity management tools in the banking system. The operation underscored banks' continued reliance on RBI facilities to park surplus funds as they navigate evolving liquidity conditions.
Concurrently, the 10-year government security yield climbed to 7.29 per cent, extending its recent upward movement. The rise in yields reflected investor expectations surrounding the central bank's potential open market operation (OMO) sales, which are anticipated to influence the broader debt market trajectory.
The substantial participation in the VRRR auction signals banks' preference for the RBI's reverse repo window despite rising yields elsewhere in the market. The operation allows banks to deposit funds with the central bank at predetermined rates, providing a safe avenue for liquidity management.
Market participants are closely monitoring the RBI's next policy moves and any announcements regarding OMO sales, which could influence both short-term liquidity conditions and the trajectory of government security yields in coming sessions.