- Wealth PMS (50L+)
The RBI is buying bonds yet again! In an effort to push even more money down our gullets – despite having expanded their balance sheet at an average of 16% per year in the 15 years – the RBI will conduct Open Market Operations (OMOs) to pump rupees into the system.
OMOs are auctions where banks can sell bonds to the RBI who will print money and give it to them in return. The bonds are carried as assets on RBI’s balance sheet, the money printed is a liability.
I don’t get why this is even remotely necessary. Bond yields in the market don’t indicate a lack of liquidity. There isn’t any “stretch” in the overnight markets, repo, call or anything. Adding 7,000 cr. – a small amount but this stuff adds up – seems unnecessary.
They’re telling us that the OMO of 7,000 cr. on friday is “consistent with the stance of monetary policy and based on the current assessment of prevailing and evolving liquidity conditions”. This can only mean two things:
I’m very disappointed in this move, because it reflects short term thinking. RBI is basically taking my children’s future away by doing silly things to shore up the today and ruining our tomorrows.
I don’t expect anyone to care. I’m just shouting from this little rooftop.