saw this just now
RBI bought Rs 50,000 crore of G-Secs on March 9 and another Rs 50,000 crore on March 13. Rs 1 lakh crore in one week. I hold corporate NCDs not G-Secs so I wasn’t sure if this affects me at all. Does it?
It affects you indirectly. When RBI buys G-Secs through OMO it pushes G-Sec yields down by increasing demand. Corporate bond yields are priced as a spread over the G-Sec benchmark. If G-Sec yields fall, corporate bond yields tend to follow over time. The bonds you currently hold have a fixed coupon so your actual income does not change. But any new bonds coming to market in the next few weeks will likely price at slightly lower yields than what you saw a month ago.
Worth adding context on why RBI did this now specifically. Advance tax payments and GST collections are due later this month. These create large cash outflows from the banking system and can tighten liquidity sharply. RBI is front-loading the OMO purchases to ensure there is enough liquidity in the system before that squeeze hits. It is more of a seasonal liquidity management move than a signal about rate direction. The Rs 1 lakh crore headline sounds large but the banking system surplus is still around Rs 2.4 to 3 lakh crore even after accounting for the upcoming outflows.
Sushant is right on the seasonal angle. The market read on this is slightly positive for bonds but not dramatically so. G-Sec yields have been sticky around 6.65 to 6.70% despite the rate cut in December. RBI is essentially backstopping the market to prevent yields from spiking on supply pressure. For corporate bond investors the practical implication is a more stable rate environment in the near term. Not a rally but less volatility. If you were planning to deploy into bonds in the next 2 to 4 weeks this is a reasonably supportive backdrop.