The Reserve Bank of India (RBI) succeeded where Moody’s Investors Service failed. The central bank’s decision to scrap open market sales of government bonds worth Rs10,000 crore led to a sharp fall in yields that Moody’s decision to raise India’s sovereign ratings by a notch last week failed to achieve.

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The yield on the 10-year government bond fell by as much as 16 basis points on Monday, the biggest slide in a year. At the close, the bond was trading at 6.88%. Bond yields and prices move in opposite directions. A basis point is one-hundredth of a percentage point.

“Other than global headwinds and domestic fiscal worries, the reason for higher yields was the large amount of OMO (open market operation) sales in the last few months, which increased overall bond supply and also soaked up liquidity. With this cancellation of OMO, it seems that the market might have taken signal that this will be the end of the OMO sales,” said Soumyajit Niyogi, associate director at India Ratings and Research Pvt. Ltd.

So far this year, RBI has sold bonds worth Rs90,000 crore through OMOs to absorb excess liquidity from the banking system. However, these sales plus cash withdrawals have drawn down banking system liquidity to close to the central bank’s preferred neutral level, prompting it to pause these operations. As of Friday, the surplus cash at banks dropped to Rs58,350 crore from more than Rs5 trillion in March, according to RBI data.

On Friday, Moody’s raised India’s sovereign rating to Baa2, the first upgrade in 14 years, from the lowest investment grade of Baa3, and changed the outlook from positive to stable. Following the rating upgrade, bond yields fell 13 basis points. However, by close of trading on Friday, bond prices erased all the gains and ended little changed on concerns of fiscal slippages and a surge in international crude oil prices which may lead to higher inflation. That fed into analysts’ belief that RBI may not cut interest rates this year while the US Federal Reserve may hike rates in December. A narrowing premium for Indian bonds over US treasuries is a negative for the local market.

Where the Moody’s upgrade did work was in pushing down the yield premiums of Indian companies’ dollar bonds to their lowest levels in a decade. In effect, local firms can raise dollar funds at a cheaper rate now.

According to a Bloomberg report, this has prompted a rush by firms to refinance debt or raise new foreign debt at lower rates. The report cited the examples of Reliance Industries Ltd, Adani Group and state-owned Rural Electrification Corp., which Bloomberg said had hired bankers or opened books for new dollar notes, quoting people it didn’t identify.