STUDY OF RISING BENCHMARK 10-YEAR BOND YIELD AND ITS RELEVANCE TO ECONOMIC FACTORS

Abstract

The paper reviews the increasing benchmark 10-year bond yield. It mentions the factors which are contributing towards the increase in bond yields and also the impact of rising bond yield on the Indian economy. The bond yield has impact on stock market, debt market and the currency of a country. The government bond yield of a country helps to understand the state of its economy and it is often compared with bond yields of other countries as well. The health of a country's economy is indicated by inflation, lending rate of the central bank, GDP growth rate, and national income and this can be analysed by an economist through Conventional metrics. The objective of paper is to understand the rising bond yield (benchmark) and factors affecting the Indian economy and study the correlation and influence of economic parameters such as Sensex, Nifty, FII, DII, CPI, India VIX and exchange rate. The secondary data of five years is being used for the study and the data is being further analysed by using statistical tools using SPSS software. The finding shows that for developing country like India how government is among the biggest investors in the economy, so for assessing economic health of the country, bond yields can be a useful parameter. Economists use conventional matrices for measuring the health of a country's economy which includes inflation, lending rate of the central bank, growth rate, and national income. These are further measured by as Sensex, Nifty, FII, DII, CPI, India VIX and exchange rate. However, bond yields are also a very perceptive means of evaluating the trajectory of an economy. As investors sell government bonds, prices decrease and yields increase. A higher yield indicates greater risk. If the yield offered by a bond is much higher than what it was when issued, there is a chance that the company or government that issued it is financially stressed and may not be able to repay the capital.