Maturity profile, Financial Management

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.


Posted Date: 9/10/2012 7:44:13 AM | Location : United States

Related Discussions:- Maturity profile, Assignment Help, Ask Question on Maturity profile, Get Answer, Expert's Help, Maturity profile Discussions

Write discussion on Maturity profile
Your posts are moderated
Related Questions
Q. Reasons for Time Preference of Money? 1) Future Uncertainties: One of the reasons for preference for current money is that there is a certainty about it whereas the future

1) According to the IFE (RIP), if U.S. investors expect a 3% rate of domestic inflation over one year, and a 6% rate of inflation in European countries that use the EUR, and requir

SUPERVALU INC . , a large US retail grocer, had $36.1 billion in sales for its fiscal year ended February 25, 2011. SUPERVALU currently reports using US GAAP. The controller of

The credit term from the supplier is 2/30, net 60. Question: Calculate the effective annual rate if the firm does not take the discount.

Internal Rate of Return (IRR) : This rate attempts to find the earnings rate, which equates the current value of the streams of earnings to the investment outlay. IRR is descri

Under write An arrangement under which the investment banks agree to purchase a certain amount of privacy of a new issue (typically an IPO) at a given date for a given pric

Need for Simulation If the mathematical model set up could always be optimized by the analytical approach, then, there would be no need for simulation. Only when interrelation

Question 1: Explain clearly why "Public Policy Making constitutes a major part of the work of the Government. Question 2: Consider the role of interest groups in public