Title : G-SECS: Prelims Specific Topic

Date : Dec 28, 2021

Description :

• What are Government Securities:

 

• A government security (G-Sec) is a tradable instrument issued by the federal government or individual states.
• It recognizes the government's financial commitments.
• Short-term securities (treasury bills with original maturities of less than one year) and long-term securities (government bonds or dated securities with original maturities of one year or more) are examples.
• Treasury bills and bonds, often known as dated securities, are both issued by the federal government.
• State governments only issue state development loans, which are bonds or dated securities.
• They are known as risk-free gilt-edged instruments because they are issued by the government and bear no danger of default.
• FPIs are authorized to trade in G-Secs as long as they stay within the quantitative limits that are set from time to time.

 

• What causes G-secs to be so volatile:

 

• In the secondary markets, G- Sec prices change a lot. Factors that influence their prices include:
• The securities' supply and demand.
• Interest rate changes in the economy, as well as other macroeconomic elements like liquidity and inflation.
• Other market developments, such as money, foreign exchange, credit, and capital markets.
• International bond market developments, particularly in the US Treasury market.
• Changes in repo rates, cash reserve ratios, and open-market operations are examples of RBI policy activities.

 

• Source à The Hindu à 27/12/21 à Page Number 12

Tags : government security, Short-term securities