The Analyst's Path

Glossary

Open market operations

M7.02 · MS1.03

Also called OMO, open market operation.

The central bank buying or selling government securities to add or remove liquidity from the banking system.

Buying bonds puts cash into the system and pushes yields down; selling does the reverse. The operations are the mechanism by which a policy stance becomes an actual quantity of money.

They also affect the shape of the bond curve, since the central bank chooses which maturities to transact in.

Announcements are published with amounts and tenors.