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Monetary Management and Financial Intermediation 137

Figure 12: Government Bond yields in India (per cent)

Source: Bloomberg

4.33 The lower policy rates have transmitted to corporate bonds and the yield has come down
substantially from March 2020 (Fig 13 (a) and Fig 13 (b)). Rates have reduced for both AA and
AAA rated bonds. The yields on 1 year, 3 year, 5 year, 10 year AAA corporate bonds have fallen
by 238 bps, 237 bps, 155 bps, 112 bps respectively from January 2020 to December 2020. If the
fall of entire easing cycle is considered (i.e. since early 2019), then the decline are 430 bps, 326
bps, 271 bps and 212 bps respectively.

Fig 13(a): Yield on AA rated corporate bonds

Source: CMIE