6.75 per cent: The yield on the 10-year government bond.
- The yield on the benchmark 10-year government bond has been rising ever since the Reserve Bank of India (RBI) announced a pause in its rate-cut cycle.
- The RBI unexpectedly paused its rate-cut cycle primarily due to concerns over rising consumer inflation.
- On December 4, the benchmark yield had closed the day at 6.47 per cent. It has risen by about 28 basis points since then. On December 16, it even scaled the 6.80 per cent level but has softened a little since.
- Various factors are pushing the one-year bond yield up. There are fears that government borrowings from the markets may exceed earlier expectations. If this happens, it will exert upward pressure on interest rates within the economy.
- The Indian bond market has also been affected by international trends. Over the past month, the yield on the 10-year US government bond has also hardened from 1.78 per cent to 1.91 per cent. They have not allowed themselves to be swayed by short-term market movements.
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A few links for further reading
Invest and emigrate
The great Indian dream of settling abroad is achievable if one has a few crores to invest. Rich nations offer a variety of investment options in a quid pro quo arrangement: immigrants get a better quality of life and revenue from them helps these countries’ finances. Wealthy Indians, troubled by polluted cities and the red tape holding up entrepreneurship, may want a quick ticket out of the country. Sanjay Kumar Singh lists a range of options: from a Canadian province’s investor programme to America’s US EB-5 plan.
Small savings schemes
Investors in small savings schemes breathed a sigh of relief when the government announced on October 1 that interest rates on these instruments would not be revised for the fourth quarter of the calendar year. With the economy witnessing a slowdown, and the stock markets also turning volatile, many investors are looking for alternative avenues to park their savings. Small savings schemes, with their sovereign guarantee, have emerged as a viable alternative.
Hard path to growth
The signals for the economy are not positive: overall demand is yet to pick up; the share of total exports in India’s GDP is declining, and industrial output pattern remains worrying.