Switching Operations used by RBI
Switching Operations Recently the GOI bought back 6.18% bonds maturing in 2024 worth 226.10 billion rupees ($2.78 billion) at a price of 98.62 rupees while it issued 8.28% 2032 bonds worth 210.26 billion rupees to the RBI at 106.05 rupees, as per the RBI. Such operations are called switch operations which are undertaken with the sole purpose of smoothening the liability profile of the issuer. The 10-year government security’s yield fell by 7 basis points after government switched bonds and securities worth rupees 1.19 trillion with the RBI which brings down the redemption pressure on Indian government by around rupees 62,000 crore. What are bond switch operations? Bond switching operations allow governments to repurchase the older sovereign bonds (basically short-term) and in their place issue newer bonds (long-term) to the participants. Since such operations are cash neutral as fresh securities are issued which replace the old existing securities. ...