RBI had introduced daily VRR auctions on January 16 to support banks against the liquidity deficit seen in the system then.
The system has had a daily average surplus liquidity of ₹2.75 lakh crore so far in June, taking system liquidity above 1% of net demand and time liabilities (NDTL). Liquidity has been in surplus since late March.
“Given the surplus – above 1% of NDTL – the need to do additional liquidity injection is not there,” said Sakshi Gupta, principal economist at HDFC Bank.
Additionally, yields on benchmark paper rose six basis points to 6.35% after the change in monetary policy stance to ‘neutral’ last week, signalling a slow cycle ahead.
“The daily auctions were done to stabilise liquidity. So, now that it has happened, they (RBI) withdrew the daily auctions,” said Madan Sabnavis, chief economist at Bank of Baroda. “This also falls in line with the fact that no new OMOs (open market operations by the central bank to manage liquidity) are announced. Now, whoever has to borrow will go to the call market, which is what RBI wants to deepen,” he added. In April, RBI governor Sanjay Malhotra had said the central bank would aim for a range near 1% of NDTL as a target for surplus liquidity in the system.Sentiments in the bond market, however, turned slightly negative after the bumper reduction in policy rates on Friday and changing of stance to ‘neutral’.
Possible triggers of stop losses for institutions may have added to the pressure on yields, which closed at 6.35% on Monday, up from its previous close of 6.29%, according to CCIL data.
Stop loss is an automated trading instruction to buy or sell a security once its price reaches a predetermined “stop price”.
“Bonds are trading with a negative sentiment, now that the terminal rate is in sight. Markets and analysts thought that we would see cuts till mid FY26, but after this policy, that view has changed,” a bond trader from a primary dealership said.
By
