BOND YIELDS

BOND YIELDS

Subject : Economics

Context :Indian equity benchmarks dropped by more than 1% for the second straight session on Thursday on concern that rising U.S. bond yields in the wake of the Federal Reserve’s dovish policy stance could herald foreign fund outflows.

Concept :

• 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.