“RBI governor expressed the need for orderly evolution of yields and will initiate 1 trillion of OMOs during Q1 FY22 to combat extreme volatility. RBI’s liquidity support will certainly help in assuaging market apprehensions given that supply of G-Sec paper will remain elevated on the back of frontloading of market borrowing. For FY22 as a whole, OMO operations are expected to be above INR 3 trillion, similar to FY21 level. The possibility of the inclusion of Indian G-secs in the global bond indices will also absorb the supply. Nevertheless, we expect 10year yields to inch higher, possibly trade in the range of 6.2-6.25% in the near term, as there are concerns over stubborn core inflation, resurgent COVID infections, renewed localized lockdowns and relatively higher sovereign yields in US,” said Amar Ambani Senior President & Research Head YES Securities.
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