RBI bought INR144.9B of 7.41% 2036 bond at INR105.09 cutoff price

The Reserve Bank of India (RBI) purchased bonds worth ₹144.9 billion ($1.58 billion) in its latest open market operation, including a significant portion of the 7.41% 2036 state bond, which was priced at ₹105.09 per ₹100 face value. This transaction is part of the RBI's broader effort to inject liquidity into the banking system, with two tranches of ₹500 billion each scheduled for March 9 and 13, 2026. The bond purchase aligns with the central bank's strategy to counter inflationary pressures from rising crude oil prices, which threaten India's inflation and fiscal stability.

The 7.41% 2036 bond, maturing in 10 years, was among the instruments targeted in the auction. Traders had anticipated cutoff yields for 10-11 year state bonds to range between 7.41% and 7.49%, reflecting market expectations of RBI intervention to stabilize yields amid volatility. The purchase follows a nine-day streak of RBI bond buying, with the "others" category (including the RBI) net buying ₹522 billion in bonds since March 5.

The RBI's actions aim to offset liquidity strains caused by oil price shocks and maintain neutral monetary policy, as India's inflation rate of 2.75% in January remains below the 4% target. With banking system liquidity in surplus, the central bank's bond purchases also help manage the yield curve ahead of fiscal year-end pressures. Analysts suggest the RBI's proactive stance signals a commitment to balancing inflation control with economic growth amid geopolitical uncertainties.