Maturity profile, Financial Management

Assignment Help:

Maturity Profile

Even though there is no ideal theory/concept of the maturity of the instruments, some important issues that should be considered while balancing the long-term and short-term maturities are: market preference, government costs, grouping of maturities, and development of yield curve. Benchmarking of the government securities is necessary considering its well-functioning market. This requires a careful approach to avoid disintegration and increase consolidation. The typical benchmark securities in our market are of 2, 3, 5 and 10 year's maturity, whereas in countries like the USA, the securities can have a maturity period up to 30 years.

When the government in 1992-93 revived the borrowings at market rates, the maturities of most of the securities were made below 10 years. High interest rate cyclic implementation of the auction system to achieve the market determined interest rates has made this compression necessary as it requires a market with short maturity structure. The result is the bunching of maturities with a tough task of managing liquidity. Since the last three years the RBI has made efforts towards longer maturities, and fixed rates to balance the maturity pattern. Some situations exist when the government does not confine to the perceived high rates of interest, and large mismatches occur between the asset liability of the banks and also greater risk of interest rates. The RBI has developed floating rate bonds and also taken steps to develop the STRIPS market in the Government Securities segment. To consolidate the maturity profile of the securities the RBI followed the method of re-opening the existing securities on price-based auction approach. Thus, the large borrowing (gross) program has proved advantageous to RBI to elongate and strengthen the profile.

 


Related Discussions:- Maturity profile

Non-agency mortgage backed securities, The mortgage-backed securiti...

The mortgage-backed securities dealt with till now are agency mortgage backed securities. There are other MBS which can be for any kind of real estate property.

What are the financing and investing decision, What are the Financing and i...

What are the Financing and investing decision Financing and investing decisions are closely related as the company is going toraise money to invest in a project or assets. Thos

The japanese pension fund system, The Japanese Pension Fund System The J...

The Japanese Pension Fund System The Japanese pension system is a multi-pillar system. Public and private pension schemes are the two important pillars. The first tier is the Ba

Genesis Energy Capital Plan Report, Calculate the firm’s WACC. Prepare and ...

Calculate the firm’s WACC. Prepare and analyze each planned capital expenditure. Evaluate, rank, and recommend the capital expenditures according to beneficial value to the organiz

What do you mean by time value of money, Q. What do you mean by Time value ...

Q. What do you mean by Time value of money ? The concept of TVM refers to the fact that the money received today is different in its worth from the money receivable at some oth

Definition of financial management, DEFINITION OF FINANCIAL MANAGEMENT ...

DEFINITION OF FINANCIAL MANAGEMENT Financial Management is a stream concerned with the generation and allotment of scarce resources (generally funds) to the most proficient use

Foreign exchange exposure, Using an appropriate 'factor model', assess (a) ...

Using an appropriate 'factor model', assess (a) the performance of the management in creating value for shareholders and (b) the extent of the foreign exchange exposure of a FTSE10

Define primary reserves of a bank, What are a bank's primary reserves? When...

What are a bank's primary reserves? When the Fed sets reserve requirements, what is its primary goal? Vault cash and deposits in the bank's account at the Fed are employed to s

Impact of the yield level in bonds, Different bonds trade at differen...

Different bonds trade at different yields though the coupon rate, maturity, and embedded options are same for them. Assuming that all the other bond characteristi

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd