RBI’s Operation Twist

Operation Twist is the RBI's simultaneous selling of short-term securities and buying of long-term securities through Open Market Operations (OMO) in order to bring down long-term interest rates and bolster short-term rates.

  • It was US Federal Reserve Bank’s monetary policy which involved buying and selling of government bonds to provide monetary easing for the economy.

Impact

  • As the central bank buys long-term securities (bonds), their demand rises which in turn pushes up their prices.However, the bond yield comes down with an increase in prices (inverse relationship).
  • The interest rate in an economy is determined by yield. If yield is low, interest rates ....
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