GOVERNMENT OF INDIA BOND RATES – AS ON 29th MAY 2020
The yield rates below are comprised of Indian government bills and bonds. The rates given below are based on the benchmark FIMMDA (Fixed Income Markets and Derivatives Association of India) indices. FIMMDA is the nodal agency designated by RBI to set financial benchmarks, and the benchmarks are published by Financial Benchmark India Pvt. Ltd (FBIL), authorised by RBI for benchmark administration activities relating to the valuation of Government of India Securities
G-Sec – Government of India dated Securities.
Yield indicates annualised yield as on 29th May 2020.
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NOTES ON BOND RATES
- Discount rate used in Actuarial Valuation is determined by reference to market yields at the end of the reporting period on government – as Per Para 83 of IND AS 19. Impact of change in assumption is recognised in Profit & Loss in case of AS 15 valuations, whereas in Ind AS 19 valuations it is recognised though OCI (post-employment obligations) and P&L will not be affected.
Figure 1: Government of India G-Sec Yield Comparison
- Comparing 10 Year G-Sec yields on 31st March 2020 and 29th May 2020, we can see that the yield has reduced by almost 100 basis points. This follows a series of rate cuts by the Reserve Bank of India in response to the outbreak of COVID19 in India.
- Comparing Short term (< 5 years) G-Sec yields on 31st March 2020 and 29th May 2020, we can see that there is a significant reduction in the bond yields as on 29th May 2020.
- Comparing Long term G-Sec yields (15 years and above) on 31st March 2020 and 29th May 2020, we can see that the yield has reduced by about 21 bps.
- The decrease in G – Sec yields as on 29th May 2020 from the yields as on 31st March 2020 will result in increase in the actuarial liability.
- Decrease in G – Sec yields will result in Actuarial Losses in Defined Benefits Obligations due to discount rate impact. Offsetting this impact by changing other actuarial assumptions like salary growth rate should be done cautiously by considering relevant factors, and after discussion with actuary and auditor.