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First purchase of G-secs worth ₹25,000 cr under G-SAP 1.0 on Apr 15: RBI

MUMBAI :
The Reserve Bank on Thursday said the first purchase of government securities worth 25,000 crore under the G-sec Acquisition Programme (G-SAP 1.0) will be done on April 15 with a view to enabling a stable and orderly evolution of the yield curve.

After the Monetary Policy Committee meeting on Wednesday, Governor Shaktikanta Das announced that the RBI will conduct open market purchase of government securities (G-secs) of 1 lakh crore under the G-SAP 1.0 in the first quarter of this financial year.

“The first purchase of government securities for an aggregate amount of 25,000 crore under G-SAP 1.0 will be conducted on April 15, 2021,” the central bank said in a statement.

On April 15, the RBI will purchase five government securities of different maturities amounting to 25,000 crore. There will be no security-wise notified amount.

On Wednesday, the RBI had said it will put in place a secondary market government securities acquisition programme or G-SAP 1.0 for this fiscal to enable an orderly evolution of the yield curve.

The central bank said the endeavour through the programme will be to ensure congenial financial conditions for the economic recovery to gain traction.

Under the programme, which will be for 2021-22, the RBI will commit “upfront to a specific amount of open market purchases of government securities with a view to enabling a stable and orderly evolution of the yield curve amidst comfortable liquidity conditions,” Das had said.

The benchmark 10-year bond, which traded at 5.93% (on an average) during April 2020-January 2021, spiked to 6.25% on March 10, 2021 before coming down again. In sync with G-Sec yields, corporate bond yields also hardened across issuers and rating categories in the recent period.

G-SAP will run alongside RBI’s regular operations, including Liquidity Adjustment Facility (LAF), open market operations (OMOs) and Operation Twist, Deputy Governor Michael Debabrata Patra had said, adding the programme is built into the central bank’s liquidity planning framework for 2021-22 as a whole.

The Governor had said the positive externalities of G-SAP 1.0 operations need to be seen in the context of those segments of the financial markets that rely on the G-Sec yield curve as a pricing benchmark.

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