Bond Market – RBI
RBI’s G-SAP led to the yield on the benchmark 10-year bond falling below 6%. Movements in yields, which depend on trends in interest rates, can result in capital gains or losses for investors. Drop in bond yield would benefit the investor as the price of the bond will rise, generating capital gains. Though decline in US Treasury yields or the economic uncertainty caused by Covid-19, the most important driver of the bond market was RBI interventions by launching the G-SAP programme. A decline in yield is also better for the equity markets because money starts flowing out of debt investments to equity investments. The RBI has been aiming to keep yields lower as that reduces borrowing costs for the government and also reduces lending rates of banks.
- What is G-SAP program and its aims?
- What is bond yield? How does it impact market and investors?