"Why Global Bond Yields Are Rising Everywhere Except China"
Bond yield
a bond's real annual return at its current market price, moving opposite to price
G-Secs
government securities issued by India's central government to borrow from the market
A government bond is a loan that an investor gives to a government. In return, the government pays regular interest. This interest is called a coupon. The government also repays the full amount at maturity. A bond's yield is its real annual return at the current market price. Yield and price always move in opposite directions. When investors sell bonds, prices fall and yields rise. For decades, US Treasuries held the world's lowest yields. Investors saw them as the safest asset on earth. Riskier economies, including India, had to offer higher yields. They needed higher yields to attract the same money.
India's government bonds are called G-Secs. Domestic banks, insurance companies and pension funds hold most of them. Foreign investors can buy them only within limits. The Reserve Bank of India (RBI) sets these limits. Indian yields are not decided alone. Indian G-Sec yields respond to US Federal Reserve decisions, RBI operations, and domestic inflation and short-term rates. This is why a rate move in Washington can quickly change what the Indian government pays to borrow at home. The RBI follows clear rules in its responses. When inflation is high, the RBI typically sells government securities to cut money supply. It does not buy them. When the rupee falls sharply, the RBI sells dollars to support its value. When interest rates abroad fall (in the US or EU), foreign money looks for better returns elsewhere. So the RBI buys dollars to stop the rupee from rising too fast.
US Federal Reserve decisions directly influence Indian government bond yields. Global investors compare returns across countries. They shift money based on which returns are better. Foreign investors can only buy Indian G-Secs within RBI-set limits. This makes RBI policy a direct constraint on bond market dynamics.
Global bond yields are rising together because central banks worldwide are keeping policy rates high for longer. They do this to control inflation. Also, governments everywhere are issuing more debt. The 10-year US Treasury yield, long the benchmark for global finance, has climbed to its highest level since 2007. As it rises, the India-US yield spread narrows. This spread is the gap between India's 10-year G-Sec yield and the US Treasury yield. A narrower spread gives foreign investors less extra reward. They get less reward for holding riskier Indian debt. …
Indian Government Bond Yields are influenced by which of the following?
1.Actions of the United States Federal Reserve
2.Actions of the Reserve Bank of India
3.Inflation and short-term interest rates
Select the correct answer using the code given below.
Which one of the following is not the most likely measure the Government/Reserve Bank of India takes to stop the slide of Indian rupee?
With reference to the Indian economy, consider the following statements:
1.If the inflation is too high, Reserve Bank of India (RBI) is likely to buy government securities.
2.If the rupee is rapidly depreciating, RBI is likely to sell dollars in the market.
3.If interest rates in the USA or European Union were to fall, that is likely to induce RBI to buy dollars.
Which of the statements given above are correct?
What are the causes of persistent high food inflation in India? Comment on the effectiveness of the monetary policy of the RBI to control this type of inflation.
With reference to the Reserve Bank of India's response to macroeconomic conditions, consider the following statements: 1. The RBI sells government securities when domestic inflation is high. 2. The RBI sells dollars when the rupee depreciates rapidly. 3. The RBI buys dollars when interest rates abroad fall. How many of the above statements are correct?
Consider the following statements regarding government bond yields: 1. A bond's yield and its market price move in the same direction. 2. A narrower India-US yield spread makes Indian bonds relatively less attractive to foreign investors. Which of the statements given above is/are correct?
A rise in the US Federal Reserve's policy rate is most likely to have which of the following effects on India's bond market?
Why have Chinese government bond yields remained largely insulated from the recent global rise in bond yields?
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