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SECURITIES
GOVERNMETN OF INDIA SECURITIES
These are the vehicles through which the GOI
borrows money from the public and institutions for
more than one year.
Yields at the time of issue are either marketdetermined through an auction, or predetermined by
the RBI.
Local currency borrowings of any Government are
considered risk free, since the Government can
always print notes to redeem its obligations.
On account of the lack of default risk (credit risk),
Government securities tend to offer lower yields
than other comparable bonds and debentures.
COMMERCIAL PAPERS.
BANK DEPOSITS AND OTHER FIXED DEPOSIT
INVESTMENTS.
Fixed deposits can also be issued by non-bank
manufacturing or finance companies.
These are generally for one to three years.
PUBLIC PROVIDENT SCHEME (PPF)
Investment with a view to saving on tax is a well
known practice in India.
PPF is viewed as a low risk and excellent return
vehicle.
Yield curve
The normal or positive yield curve is the upwardsloping yield curve where short-term rates are lower
than long-term rates.
Inverse or negative yield curve.
There are often periods when normal conditions do
not apply and different yield curves might result.
Some times short term rates are higher then longer
term rates.
This produces a downward, negative, inverse yield
curve.