Question

Indian Government Bond Yields are influenced by which of the following?

1. Actions of the United States Federel 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.

1. 1 and 2 only
2. 2 only
3. 3 only
4. 1, 2 and 3

Answer 1

Correct Answer - Option 4 : 1, 2 and 3

The correct answer is 

• A government bond is a debt instrument issued by the Central and State Governments of India.
• A government bond in India is essentially a contract between the issuer and the investor, wherein the issuer guarantees interest earnings on the face value of bonds held by investors along with repayment of the principal value on a stipulated date.
• Government Bonds India, fall under the broad category of government securities (G-Sec) and are primarily long term investment tools issued for periods ranging from 5 to 40 years. It can be issued by both the Central and State governments of India.
• Bond yield is the return on the bond an investor will get by investing in a bond. 
• Bond yield is inversely proportional to Bond price. As bond prices increase, bond yields fall.
• Indian Government Bond Yields are influenced by:-
  • The monetary policy of the Reserve Bank of India.
  • The course of interest rates.
  • The fiscal position of the government and its borrowing programme. 
  • Global markets.
  • Economy. 
  • Inflation.
• Hence all the there factors can influence Indian Government Bond Yields.