�ेस �काशनी PRESS RELEASE

भारतीय �रज़वर् ब�क

RESERVE BANK OF INDIA
वेबसाइट : www.rbi.org.in/hindi
संचार िवभाग, क� �ीय कायार्लय, एस.बी.एस.मागर्, मुंबई-400001
0

Website : www.rbi.org.in
_____________________________________________________________________________________________________________________
Department of Communication, Central Office, S.B.S.Marg, Mumbai-400001 ई-मेल/email:
फोन/Phone: 022- 22660502 helpdoc@rbi.org.in
December 30, 2019

RBI Working Paper No. 05/2019:

Term Premium Spillover from the US to Indian Markets
The Reserve Bank of India today placed on its website a Working Paper titled
“Term Premium Spillover from the US to Indian Markets” under the Reserve Bank of India
Working Paper Series*. The Paper is authored by Archana Dilip.
The paper estimates and analyses term premium in India and makes an
assessment of interconnectedness and transmission of shocks from the US term structure
of sovereign bond yields to that of India. The term premium is estimated by decomposing
the yield into two components - risk-neutral rate which reflects expectations of future short-
term rates; and term premium which captures the investors’ expectations of future central
bank policy, inflation and growth shocks. The paper identifies inflation volatility and
monetary policy uncertainty as the two important factors influencing term premium in India.
Further, empirical findings indicate that the spillovers between the US treasury yields and
government security yields in India have increased during the sample period from April,
2009 to April, 2019. The paper finds stronger spillover with increased financial integration
and volatile bond markets. The paper concludes that for the long-term yields, the term
premium channel is a stronger transmission channel as compared with the risk-neutral
rates channel.

Ajit Prasad
Press Release: 2019-2020/1542 Director

* The Reserve Bank of India introduced the RBI Working Papers series in March 2011. These papers
present research in progress of the staff members of the Reserve Bank and are disseminated to elicit
comments and further debate. The views expressed in these papers are those of authors and not of the
Reserve Bank of India. Comments and observations may kindly be forwarded to authors. Citation and use of
such papers should take into account its provisional character.