Determinants of government bond returns: an Indian experience
Authors :- M Faniband, P Jadhav
Publication :- International Journal of Computational Economics and Econometrics, 2024
This paper examines the impact of macroeconomic factors and non-macroeconomic factors on government bond returns in India using quantile regression methodology and the monthly dataset from April 2010 to May 2022. This paper produces a new dataset of three government bonds indices which include the top 20 and top 5 bonds and Treasury Bills (T-Bill). We are the first to document the following results. First, the top 20 and top 5 traded bonds have less sensitivity to the exchange rates. Second, inflation has a negligible impact on the top 20 and T-Bills. Third, all three bonds are significantly affected by interest rates. Fourth, the effect of geopolitical risk is significant on T-Bills. Firth, economic policy uncertainty and volatility do not affect bond returns. Sixth, the Nifty has a significant positive impact on the top 20 and top 5 bonds. Our results are useful for investors, portfolio managers and policymakers.