UPSC Previous Year Question | Prelims GS | 2021

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.

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

Answer

Correct Answer

1, 2 and 3

Explanation

G-sec yields respond to domestic monetary policy (repo rate, liquidity operations, open market operations by the RBI), to inflation expectations and short-term interest rates, and to global cues such as US Federal Reserve policy, which drives foreign portfolio flows and global yields. All three factors are correct.

Topics: bond market, determinants of government bond yields, economy, financial markets