GOVERNMENT OF INDIA BOND RATES – AS ON 31st JULY 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.
| Year | Tenor | Yield |
G-Sec | 3M | 3.45 % | |
G-Sec | 6M | 3.55 % | |
G-Sec | 2021 | 1Y | 3.70 % |
G-Sec | 2022 | 2Y | 4.06 % |
G-Sec | 2023 | 3Y | 4.63 % |
G-Sec | 2024 | 4Y | 4.94 % |
G-Sec | 2025 | 5Y | 5.13 % |
G-Sec | 2026 | 6Y | 5.64 % |
G-Sec | 2027 | 7Y | 5.88 % |
G-Sec | 2028 | 8Y | 6.09 % |
G-Sec | 2029 | 9Y | 6.09 % |
G-Sec | 2030 | 10Y | 5.87 % |
G-Sec | 2031 | 11Y | 6.15 % |
G-Sec | 2032 | 12Y | 6.44 % |
G-Sec | 2033 | 13Y | 6.37% |
G-Sec | 2034 | 14Y | 6.29 % |
G-Sec | 2035 | 15Y | 6.42 % |
G-Sec | 2039 | 19Y | 6.44 % |
G-Sec | 2044 | 24Y | 6.46 % |
G-Sec | 2050 | 30Y | 6.52 % |
G-Sec – Government of India dated Securities.
Yield indicates annualised yield as on 31st July 2020.
Sources:
https://fbil.org.in/download.aspx?m=gsec&f=31072020.xls
NOTES ON BOND RATES
- Discount rate used in Actuarial Valuation is based on bond yields as on end of balance sheet reporting period – 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
1. Comparing 10 Year G-Sec yields between 31st July 2020 and 31st March 2020, we can see that the yield has reduced by 95 basis points. Comparing 10 Year G-Sec yields between 31st July 2020 and 30th June 2020, we note that there is a decrease of 12 basis points in the last 1-month period.
2. Comparing Short term (< 5 years) G-Sec yields of 31st July 2020 and 31st March 2020, we can see that the bond yield has reduced by around 80 to 115 basis points. This represents a significant drop in the short-term yields as on 31st July 2020 when compared to 31st March 2020. Between 31st July 2020 and 30th June 2020, there is a sharp 30 basis point reduction in the 5 year yield.
3. Comparing Long term G-Sec yields (15 years and above) of 31st July 2020 and 31st March 2020, we can see that there is a reduction and in the yield rates and this approaches around 40 basis points as the term approaches 25 years. Comparing Long term G-Sec yields between 31st July 2020 and 30th June 2020, we note that there is almost a 30 basis points decrease as the term approaches 25 years. Thus, there is a pattern of decreasing long term yields.
4. The decrease in G – Sec yields will result in increase in the actuarial liability. Decrease in G – Sec yields will also 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 including long term costs and practical feasibility of controlling it from HR perspectives, and after discussion with actuary and company HR team and the management of the company.
