System liquidity as measured by bids for Repo, Reverse Repo, Term Repo and Term Reverse Repo in the LAF (Liquidity Adjustment Facility) auctions of the RBI and drawdown from Standing Facilities (MSF or Marginal Standing Facility and Export Credit Refinance) was in deficit of Rs 543 billion as of 2nd December 2015. Liquidity deficit is due to Government Surplus that is at Rs 337 billion and due to outflows of Rs 500 billion on account of rise in currency in circulation. Government spending is likely to ease liquidity deficit but advance tax outflows in this month will keep liquidity in deficit mode.
The Fed is expected to hike rates in its mid December policy meet and there could be a short term reaction on the currency leading to capital outflows, RBI to alleviate fears of liquidity strain on the system has announced a 28 day Term Repo Auction for Rs 25 billion to be held on the 4th of December and an OMO Bond Purchase Auction for Rs 100 billion to be held on the 7th of December.
Money market securities yields could see an uptick in December on the back of liquidity strain but with RBI assuring liquidity to the system, yields will not rise by much.
Reserve Bank of India has decided to conduct 28-day variable rate repo auction for a notified amount of Rs 250 billion on 4th December and Open Market Operations for purchasing the government securities for Rs 100 billion on 7th December through the multiple price method.Included securities are 7.83%2018 (11th April 2018),7.28%2019(3rd June 2019),8.40%2024 (28th July 2024),7.88%2030(19th March 2030)