RBI May Inject More Liquidity to Stabilize Short-Term Rates

• RBI might need to inject more liquidity in Feb-Mar to cool rising short-term borrowing costs and stabilize bond yields.
• Despite a Rs 3 lakh crore infusion in Dec-Jan, tight system liquidity keeps pressure on money market rates like CDs and CPs.
• CP rates jumped to 13.53% by end-December from 9.71% in November; CD rates rose to 6.87% from 6.46%.
• Liquidity strain is due to subdued government spending, forex intervention, and increased credit demand.
• RBI's recent measures include OMO purchase auctions of Rs 2 lakh crore and a USD 10 billion USD/INR buy-sell swap.

Why It Matters: RBI likely to infuse more liquidity in coming months to manage short-term borrowing costs and stabilize yields.