Question
Indian Government Bond Yields are infuenced 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.
(a) 1 and 2 only
(b) 2 only
(c) 3 only
(d) 1, 2 and 3
Answer:
D
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Explanation:
Actions of the United States Federal Reserve: Changes in the policies and actions of the US Federal Reserve, such as interest rate decisions and quantitative easing measures, can have an impact on global bond markets, including Indian Government Bond Yields.
Actions of the Reserve Bank of India: The Reserve Bank of India's monetary policy decisions, including changes in key interest rates and liquidity management measures, can directly affect Indian Government Bond Yields.
Inflation and short-term interest rates: Inflation expectations and changes in short-term interest rates in the domestic market can influence the yield levels of government bonds.
Therefore, the correct answer is (d) 1, 2, and 3.