RBI Announces Three-Year Dollar-Rupee Buy/Sell Swaps To Boost Liquidity
The Reserve Bank has decided to conduct long-term dollar-rupee buy-sell swap auctions worth $10 billion for three years in a move to further add durable liquidity in the banking system, the central bank said in a press release.
The RBI will be conducting this auction on Feb. 28 from 10:30 to 11:30 am, with the near leg or spot date on March 4 and the far leg on March 6.
Market participants believe that this move will bring in a liquidity infusion of around Rs 87,000 crore in the banking system.
Three-year durable liquidity will provide vision to market participants and is being considered as a positive move for shorter-duration bonds and could lead to mild steepening in the yield curve.
Long-term dollar-rupee buy/sell swaps could also reduce the chances of open market operations for the next two weeks at least, which could impact the long-term bonds and contribute to a mild steepening in the yield curve, market participants said.
This move has come as the central bank has been trying to infuse durable and transient liquidity in the banking system by market intervention tools such as conducting OMO purchases, longer-term and short-term variable rate repo auctions and dollar-rupee buy/sell swaps.
As of Feb. 20, liquidity in the banking system was in deficit of Rs 1.87 lakh crore.
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