RBI to Meet Primary Dealers Amid Weak G-Sec Market Sentiment
The Reserve Bank of India (RBI) will meet a clutch of primary dealers (PDs) on Thursday, likely to discuss the recent weakness in the government securities (G-sec) market and gauge investor sentiment, according to market participants quoted by Mint.
While the formal agenda has not been communicated, discussions are expected to focus on elevated bond yields, subdued demand in recent auctions, and measures to restore market confidence.
Backdrop: Subdued Auctions and Market Weakness
“RBI has called a meeting of primary dealers on Thursday to discuss market sentiment and government borrowing. This is quite important as sentiments in the G-sec market are weak, and last Friday also the central bank cancelled part of the auction,” said one participant aware of the meeting.
Primary dealers act as financial intermediaries responsible for underwriting and market-making in government securities.
An email query sent to RBI on the matter did not elicit a response till press time.
The meeting follows RBI’s decision to partially cancel Friday’s bond auction after bids came in at higher-than-expected levels. The government had offered to sell four bonds worth ₹32,000 crore, maturing between 2028 and 2055. However, the auction for the 7-year bond worth ₹11,000 crore was cancelled as bids exceeded RBI’s comfort zone, amid rate-cut uncertainty and tight liquidity.
Impact on Yields and Market Curve
This development drove 10-year benchmark government bond yields to 6.6% levels intraday on Friday before easing to 6.53% after the auction results. Currently, 10-year yields trade around 6.55%.
“My best guess for the seven-year bond cancellation is that they wouldn’t have wanted the yield curve to get inverted,” another source noted.
A yield curve inversion occurs when short-term bond yields exceed long-term yields, typically signalling investor expectations of an economic slowdown or recession, prompting a shift to safer long-term bonds.
Understanding RBI’s Concerns
Analysts believe the unscheduled meeting reflects RBI’s concern over rising state government securities’ yields and the decline in domestic participation, even as foreign investor interest has increased.
RBI is likely seeking to understand the structural pressures affecting bond market liquidity and investor confidence.
For deeper analysis of RBI’s monetary policy signals and bond market trends, read insights from Ranjit Jha (CEO) — who frequently comments on India’s evolving fixed-income and macroeconomic outlook.
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