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
Explain the bird in the hand theory of cash dividends. The bird in the hand dividends theory states that dividends received now are better as compared to a promise of future divi

Q. Describe the Functions of Controller? (1) Planning and budgeting: - It comprises capital expenditure planning, profit planning, budgeting, inventory control, sales forecasti

Explain the risk–return relationship The relationship among the risk and required rate of return is termed as the risk–return relationship.  It is a positive relationship since t

comparative analysis on these two food retailing giants

What are the disadvantages and advantages of Foreign direct investment (FDI) like opposed to a licensing agreement with a foreign partner? Answer:  The major advantage of FDI (

Optimal Cash Model: Cash Management is a bigger aspect that involves range of functions that assist individuals and business to process their payments and receipts in an organ

We have seen computation of present value using single discount rate. But the right way to value a cash flow of a bond is to use multiple discount rates, i.e valuing th

Blue Sky It refers to laws that safeguard investors from being misled by investment people who misrepresent the significance value of investments to get the money of the finan

Accounting Principle Accounting principles are the primary assumptions, rules of operation, and necessary features that make up the framework for the construction of accountin

Q. Show Gross Vs net working capital? The distinction between the gross working capital or the net working capital does not in any way undermine the relevance of the concepts o