Mr. Jyoti Roy - DVP- Equity Strategist, Angel Broking Ltd
"The RBI today announced details of the securities for simultaneous purchase and sale on the 17th of September 2020. The RBI had announced on the 31st of August that it would be conducting special simultaneous purchase and sale of government securities under Open Market Operations (OMOs) for an aggregate amount of ₹20,000 crores in two tranches of ₹10,000 crores each. The first auction was conducted on the 10th of September while the second auction is scheduled for September 17, 2020. In the press release dated 14th Sep'20 the RBI has specified that they would be buying the 3 year, 5 year, and 10 year papers aggregating to ₹10,000 crores. However they have not specified the quantum of securities that they will buy across each maturity. We believe that the announcement is unlikely to have any major impact on G Sec yields as markets have already discounted it post the initial announcement on the 31st of august. Given that the spreads between the overnight rate and 10 year G-Sec still continues to remain elevated at ~200bps as compared to a normal spread of 75 bps, we believe that more such operations are needed in order to bring down the longer term rates as higher g sec rates are preventing full transmission of the rate cuts by the RBI."