(Bloomberg) -- Benchmark sovereign bonds gained in India after the central bank said it will buy long-end debt for a second week, stepping up the pace of its unconventional policy to lower borrowing costs.
The 10-year yield slid 7 basis points to 6.51%, taking the weekly decline to nine basis points.
The Reserve Bank of India is embracing a Federal Reserve-style Operation Twist, where it buys long-end debt while selling short-end bonds after five rate cuts this year failed to lift economic growth. It will conduct a second operation on Monday, following on its first such move earlier this week.
The unprecedented move has put a stop to the relentless steepening in India’s yield curve, as investors dumped long-end debt on concern the government will add to record bond sales.
The RBI will buy 100 billion rupees ($1.4 billion) of 2029 bonds through an auction on Dec. 30, it said late Thursday. It plans to sell a total 100 billion rupees of debt maturing in 2020.
The operation will flatten the yield curve further, reducing the term premium that had widened amid market concerns over India’s fiscal slippage, according to a Scotiabank note.
