RBI on 26 December announced the second round of the Operation Twist in the bond markets to be conducted on 30 December. This is exactly a week after the first round of Operation Twist. Operation Twist entails the simultaneous purchase and sale of government securities through special open market operations (OMOs) for Rs10,000 crore each on December 30 as part of the liquidity and yield adjustment mechanism of the RBI. It may be recollected that on 23 December RBI had purchased securities worth Rs.10,000 crore and sold worth Rs.6,825 crore.

The twist operation typically entails buying long maturity bonds and selling the short maturity bonds. This increases the price of long maturity bonds and reduces their bond yield in the market. The reverse happens to the short end bonds. This is useful to stabilize the bond market yields and was specifically undertaken after the yields had shot up in early December after the RBI had chosen to not cut repo rates in its December policy.