Prepare IAS Coaching
Title : G-SECS: Prelims Specific Topic
Date : Feb 19, 2022
- 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.
Tags : Treasury ,foreign exchange, credit, and capital markets