India: OMO had a significant impact on the yield curve – TDS

In view of analysts at TD Securities, India's "Operation Twist" OMO has had a significant impact on the yield curve, with longer term bonds rallying and short term bonds selling off.

Key Quotes

“In our view the buying of INR100bn of 2029 debt and selling of an equal amount of short term debt reflects an attempt to kick start waning credit growth especially as banks have not fully passed on RBI rate cuts.”

“In particular, RBI likely reacted to particularly high term premia, which itself is a result of fiscal concerns. Also yields did not react well to the surprise decision by the RBI to keep rates on hold at its last meeting.”