Concern over Bond yields
Part of: GS Prelims and GS – III – Economy
- Rising yields on government securities (G-secs) or bonds in the USA and India have raised concern over the negative impact on other assets like stock markets, gold.
- The yield on 10-year bonds in India moved up from the recent low of 5.76% to 6.20% in line with the rise in US yields, sending concerns through the stock market.
Important value additions
- Bond yield is the return an investor gets on that bond or a particular G-sec.
- Factors affecting the yield: Monetary policy of the RBI (interest Rates), fiscal position of the government and its borrowing programme, global markets, economy, and inflation.
- A fall in interest rates makes bond prices rise, and bond yields fall.
- Rising interest rates cause bond prices to fall, and bond yields to rise.
- So, a rise in bond yields means interest rates in the monetary system have fallen, and the returns for investors have declined.
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