Indian Government Bond Yields are influenced 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.
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Answer: D. All three affect Indian bond yields. US Federal Reserve rate moves shift foreign investor flows into Indian bonds. RBI's policy rate and open market operations directly move yields. Inflation and short-term rates set the return investors demand. So 1, 2 and 3.
Watch for: Students drop the US Fed thinking Indian bonds are purely domestic; global capital flows link them.
Why the other options are wrong
- A. Wrong because inflation and short-term rates also influence yields.
- B. Wrong because the US Fed and inflation also matter.
- C. Wrong because the US Fed and RBI actions also matter.
Source to check: RBI Monetary Policy Reports; RBI Financial Stability Report (sections on G-sec yields)
Answer from the official UPSC key. Written and fact-checked by AI against the official key. Spotted a mistake? Report it.