UPSC CSE Prelims
Question 1
Indian Government Bond Yields are influenced by which of the following?
- Actions of the United States Federal Reserve
- Actions of the Reserve Bank of India
- Inflation and short-term interest rates
Select the correct answer using the code given below.
View correct answer and explanation
Correct answer: D
Correct Option: D (1, 2 and 3)
Explanation: Indian sovereign bond yields reflect global borrowing conditions, RBI monetary policy and domestic inflation/short-term rates. All three listed forces affect bond prices and yields.
Statement / Pair / Item-wise Analysis:
1. Correct / qualifies - Fed tightening can raise global yields and pull capital from Indian bonds.
2. Correct / qualifies - RBI repo rates, liquidity and open-market operations affect bond yields.
3. Correct / qualifies - Expected inflation and short-term interest rates influence required returns.
Option-wise Analysis:
A. Incorrect-omits valid item 3 (Expected inflation and short-term interest rates influence required returns).
B. Incorrect-omits valid item 1 (Fed tightening can raise global yields and pull capital from Indian bonds); omits valid item 3 (Expected inflation and short-term interest rates influence required returns).
C. Incorrect-omits valid item 1 (Fed tightening can raise global yields and pull capital from Indian bonds); omits valid item 2 (RBI repo rates, liquidity and open-market operations affect bond yields).
D. Correct-selects exactly the supported statements/items: 1, 2, 3.