Indian Government Bond Yields are influenced by which of the following?
- Actions of the United States Federal Reserve
- Actions of the Reserve Bank of India
- Inflation and short-term interest rates Select the correct answer using the code given below.
Correct Answer: Option D
A bond yield represents the return an investor receives on a bond or government security. It is influenced by the bond's price, which in turn is affected by demand.
Several factors impact bond yields:
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Actions of the United States Federal Reserve: These actions can influence investment flows into India, impacting demand for government securities and, consequently, their yields. Statement 1 is correct.
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Actions of the Reserve Bank of India (RBI): The RBI's monetary policy tools affect liquidity and the cost of funds in the economy, directly influencing the demand for government securities and their yields. Statement 2 is correct.
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Inflation and short-term interest rates: These factors impact the purchasing power of individuals and, consequently, the demand and price of government securities, thereby affecting yields. Statement 3 is correct.
Therefore, all three factors influence Indian Government Bond Yields.
Hence, option d is correct.