InvestorQ : How successful has the LTRO and Operation Twist of the RBI been in bringing down the interest rates and yields in India?
Mahima Roy made post

How successful has the LTRO and Operation Twist of the RBI been in bringing down the interest rates and yields in India?

Answer
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Aditi Sharma answered.
8 months ago


When the RBI did not see commercial lending picking up despite external benchmarking, the RBI took a leaf out of the book of the ECB (European Central Bank). RBI started the use of LTROs to exert downward pressure on yields. In LTROs, the RBI buys long dated bonds and sells short dated bonds, thus depressing the bond yields at the long end as prices move up. This has been called Operation Twist and the RBI has been doing this buying and selling between 10-year bonds and 364-day Treasury Bills. Yields on AAA rated bonds are down by 40 bps and that is largely because of the government efforts on yield management. That appears to have worked in India, just like it worked in the EU region.