G-SEC Yields

G-SEC Yields

News: On June 30, 2022, the government said that it had decided to keep interest rates on small savings instruments unchanged for the July-September quarter, defying expectations of a hike in rates given the sharp rise in government security (G-sec) yields over the last three months.

About:
• G-secs, or government securities or government bonds, are instruments that governments use to borrow money. Governments routinely keep running into deficits that is, they spend more than they earn via taxes. That is why they need to borrow from the people.
• But G-secs are different from everyday lending between two private individuals or entities.
• For one, G-secs carry the lowest risk of all investments. After all, the chances of the government not paying back your money are almost zero. It is thus the safest investment one can make.
• The other ways in which G-Secs are different are in the manner in which they are structured, and how their effective interest rates (also called yields) are calculated.