Interest Rates in the Primary Market - Security Analysis and Investment Management

The interest rates in the primary market are influenced by the prevailing liquidity conditions, Reserve Bank’s intervention by way of devolvement and private placement, and amount and frequency of issues during the year.

The weighted average interest rate of dated securities of the Centre progressively rose from 11.41 per cent in 1990-91 to 13.75 per cent in 1995-96. (Table). The increased recourse to borrowing from the market and spells of tight liquidity put pressure on interest rates. Since 1996-1997, the interest rates have declined; in the year 1999- 2000, the interest rates were very close to the interest rates in 1991- 92.

Inspite of an increase in the market borrowing of the central government, the Reserve Bank was in a position to contain the interest rates. The Reserve Bank accepts the private placement of government stocks and releases them to the market when interest rate expectations become favorable. This policy of the Reserve Bank moderates the adverse impact.

Weighted Average Coupon Rates on Government of India Dated Securities

Weighted Average Coupon Rates on Government of India Dated Securities


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