RBI sold ₹500 billion of bonds today, a move that sent the five‑year yield to 6.83%, a 6‑basis‑point jump from yesterday’s close—an indicator of the central bank’s tightening stance.
The sale covered 2029‑2032 tenors, with cutoff prices ranging from 102.25 to 105.63 rupees, aligning closely with market expectations from the latest survey.
Yields spiked after the auction, reflecting the market’s nervousness over excess liquidity. The 5‑year yield ticked up to 6.83% from 6.77% before the auction, a 6‑basis‑point climb.
This operation follows the RBI’s announcement of a ₹1 trillion liquidity mop‑up scheme on Sept. 11, and comes after the banking system’s surplus cash hit a record ₹11 trillion earlier in the month.
The next two tranches are slated for Sept. 21 and Sept. 28, signalling a continued push to drain reserves and tighten the credit environment.
Analysts expect the yield curve to tighten further, potentially leading to higher borrowing costs for corporates and a modest pullback in equity valuations as the market digests the liquidity drain.