RBI data mix up sparks bond sell-off as yields rise 4 bps

The government bond market was jolted on Friday after a rare data mishap involving the Reserve Bank of India triggered a sharp, unexpected selloff. The 10 year yield rose 4 basis points from 6.52% to 6.56%, post 3 pm largely due to rupee depreciation, where it broke the psychologically significant 89 per dollar level to close at 89.49 on Friday.

Volatility spiked in the second half of trading as the rupee weakened sharply, but shock came when a newswire published the central bank’s Weekly Statistical Supplement ahead of schedule, showing the RBI had sold more than Rs 14,000 crore of government bonds through open-market operations.

Traders had positioned themselves for the opposite, wherein the RBI was to purchase bonds. The unexpected indication of heavy sales added to the weakness in bonds.

At 5 pm, the RBI’s official WSS release appeared to validate the leaked numbers, confirming large net sales of government securities.

However, about a couple of hours later, the central bank quietly revised the data, correcting the figures to reflect net purchases, instead of sales.

At the time, data showed RBI conducted an outright OMO sale of Rs 14,810 crore in the week ended November 14. With this data, markets concluded that the central bank made a net OMO sale of Rs 2,340 crore, since previously, for the week ending November 7, the RBI had carried out an OMO purchase of Rs 12,470 crore.The 10 year benchmark yield still stands at 6.55% on Monday, and has not corrected to the previous levels of 6.52%-6.53% on Friday morning