The Global Bond Index includes investment-grade and government bonds from around the world. Their maturity period is more than one year.
- The move is expected to attract foreign inflows into the debt market, and will aid the government in its market borrowing programme.
- Is a tradable instrument issued by the central or state governments. It is linked to the debt obligation of the government.
- Government securities are either short term or long term. Short-term securities usually have maturities of less than one year, and are called Treasury bills. Long-term securities usually have maturities of one year or more, and are called government bonds or dated securities.
- The central government issues both Treasury bills and bonds or dated securities, while state governments issue only bonds or dated securities, also known as state development loans.
- Government securities have practically no risk of default and hence, are called risk-free gilt-edge instruments.
Benefits of joining global bond indices – Global Bond Index:
- This will reduce the pressure on commercial banks to buy government bonds.
- Higher participation of foreign investors will help in creating a positive environment for the Indian bond markets.
- Foreign inflows into bonds will provide strength and stability to the Indian rupee.
- This will lower the cost of capital and bring down interest rates, resulting in the stability of the loan.
Source – The Hindu