Among the different tenure dated securities issued, 10 year security represents where most of the borrowing takes place.
Gaurab Parija
To fund its fiscal deficit, the government issues securities - short and long term. It funds around 90% of its fiscal deficit through dated securities.
Among the different tenure dated securities issued, 10-year security represents where most of the borrowing takes place.
India, following international standards, considers 10-year security as the benchmark security.
Also, the government generally takes mid to long term view on borrowing and long term view commonly being for a 10 year, having a 10-year benchmark seems viable.
Generally, RBI issues 10-year benchmark security on behalf of the government at the start of the fiscal year setting the yield curve trend for the year.
10 year benchmark security list 2004-2018:
The chart above shows 10-year GSec yield movement as compared to Mean for that time period.
The histogram of the 10-year Gilt yields, for the last 15 years shows the yields hovered between 6% and 8.5% for 80% of the times.
The mean yield of 10-year GSec for the period 2002 – 18 is 7.46. The median yield is 7.64. The standard deviation of the yield of 10-year GSec is 0.92.
10 year Government Yields:
(The author is Head – Sales and Marketing at IDFC AMC)
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