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    RBI Working Paper No. 05/2019: Term Premium Spillover From The US To Indian Markets

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    Vasu Ram Jayanth
    1) The Reserve Bank of India released a working paper titled "Term Premium Spillover from the US to Indian Markets" which estimates term premium in India and assesses interconnectedness between US and Indian bond markets. 2) The paper finds that inflation volatility and monetary policy uncertainty influence term premium in India. It also finds that spillovers between US treasury yields and Indian government security yields have increased from 2009 to 2019 with increased financial integration and volatile bond markets. 3) The paper concludes that for long-term yields, the term premium channel is a stronger transmission mechanism of shocks from the US to India compared to the risk-neutral rates channel.

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    RBI Working Paper No. 05/2019: Term Premium Spillover From The US To Indian Markets

    Uploaded by

    Vasu Ram Jayanth
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    1) The Reserve Bank of India released a working paper titled "Term Premium Spillover from the US to Indian Markets" which estimates term premium in India and assesses interconnectedness between US and Indian bond markets. 2) The paper finds that inflation volatility and monetary policy uncertainty influence term premium in India. It also finds that spillovers between US treasury yields and Indian government security yields have increased from 2009 to 2019 with increased financial integration and volatile bond markets. 3) The paper concludes that for long-term yields, the term premium channel is a stronger transmission mechanism of shocks from the US to India compared to the risk-neutral rates channel.

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    1) The Reserve Bank of India released a working paper titled "Term Premium Spillover from the US to Indian Markets" which estimates term premium in India and assesses interconnectedness between US and Indian bond markets. 2) The paper finds that inflation volatility and monetary policy uncertainty influence term premium in India. It also finds that spillovers between US treasury yields and Indian government security yields have increased from 2009 to 2019 with increased financial integration and volatile bond markets. 3) The paper concludes that for long-term yields, the term premium channel is a stronger transmission mechanism of shocks from the US to India compared to the risk-neutral rates channel.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    31 views1 page

    RBI Working Paper No. 05/2019: Term Premium Spillover From The US To Indian Markets

    Uploaded by

    Vasu Ram Jayanth
    1) The Reserve Bank of India released a working paper titled "Term Premium Spillover from the US to Indian Markets" which estimates term premium in India and assesses interconnectedness between US and Indian bond markets. 2) The paper finds that inflation volatility and monetary policy uncertainty influence term premium in India. It also finds that spillovers between US treasury yields and Indian government security yields have increased from 2009 to 2019 with increased financial integration and volatile bond markets. 3) The paper concludes that for long-term yields, the term premium channel is a stronger transmission mechanism of shocks from the US to India compared to the risk-neutral rates channel.

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    �ेस �काशनी PRESS RELEASE

    भारतीय �रज़वर् ब�क


    RESERVE BANK OF INDIA
    वेबसाइट : www.rbi.org.in/hindi
    संचार िवभाग, क� �ीय कायार्लय, एस.बी.एस.मागर्, मुंबई-400001
    0

    Website : www.rbi.org.in
    _____________________________________________________________________________________________________________________
    Department of Communication, Central Office, S.B.S.Marg, Mumbai-400001 ई-मेल/email:
    फोन/Phone: 022- 22660502 helpdoc@rbi.org.in
    December 30, 2019

    RBI Working Paper No. 05/2019:


    Term Premium Spillover from the US to Indian Markets
    The Reserve Bank of India today placed on its website a Working Paper titled
    “Term Premium Spillover from the US to Indian Markets” under the Reserve Bank of India
    Working Paper Series*. The Paper is authored by Archana Dilip.
    The paper estimates and analyses term premium in India and makes an
    assessment of interconnectedness and transmission of shocks from the US term structure
    of sovereign bond yields to that of India. The term premium is estimated by decomposing
    the yield into two components - risk-neutral rate which reflects expectations of future short-
    term rates; and term premium which captures the investors’ expectations of future central
    bank policy, inflation and growth shocks. The paper identifies inflation volatility and
    monetary policy uncertainty as the two important factors influencing term premium in India.
    Further, empirical findings indicate that the spillovers between the US treasury yields and
    government security yields in India have increased during the sample period from April,
    2009 to April, 2019. The paper finds stronger spillover with increased financial integration
    and volatile bond markets. The paper concludes that for the long-term yields, the term
    premium channel is a stronger transmission channel as compared with the risk-neutral
    rates channel.

    Ajit Prasad
    Press Release: 2019-2020/1542 Director

    * The Reserve Bank of India introduced the RBI Working Papers series in March 2011. These papers
    present research in progress of the staff members of the Reserve Bank and are disseminated to elicit
    comments and further debate. The views expressed in these papers are those of authors and not of the
    Reserve Bank of India. Comments and observations may kindly be forwarded to authors. Citation and use of
    such papers should take into account its provisional character.

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