A yield problem

Sharp increase in G-sec yields throws up questions

In the course of just six months or so, India’s sovereign yield curve has steepened sharply. In other words, differences between the repo rate, the policy rate targeted by the Reserve Bank of India, and the long-term rate of return on bonds have grown. While the RBI has maintained the repo rate, bond yields have gone up swiftly. At the end of the calendar year, the yield on the 10-year government securities (G-sec) hit 7.4 per cent, which is an increase of 100 basis points since July of 2017. The implications for the economic revival going forward are considerable and