[Solved] Indian Government Bond Yields are influenced by which of the following ?       1. Action of the United State Federal Reserve 2. Action of the Reserve Bank of India 3. Inflation and short term interest rates Select the correct answer using the code give below

Q6. Indian Government Bond Yields are influenced by which of the following ?      

1. Action of the United State Federal Reserve

2. Action of the Reserve Bank of India

3. Inflation and short term interest rates

Select the correct answer using the code give below

A. 1 and 2 only

B. 2 only

C. 3 only

D. 1,2 and 3

Answer: D

The return an investor receives on a particular bond or government security is known as the bond yield.

• It is based on the bond’s price, which is affected by its demand.

• The Reserve Bank of India’s monetary policy, particularly the direction of interest rates, the government’s borrowing plan, the state of the global economy and markets, and inflation are the main factors influencing the yield.

• The actions of the RBI have a direct impact on short-term interest rates, inflation, and bond yields.

• The investments flowing into India may be impacted by the Federal Reserve of the United States’ actions.

• Investors shift their asset allocation from riskier emerging market equities or debt to the US Treasury, which is the safest investment option, due to a higher return on treasury bonds in the US.