What is a Benchmark Government Bond?

Benchmark Government Bond refers to a debt security which is backed by a sovereign guarantee and is issued by the Central government. It has a residual maturity of 10 years. The Central government issued another sovereign bond on the expiry of the first one with the same residual maturity.

The rate of the coupon is decided by auction and the bond has the highest liquidity in the similar category of maturity bonds. The coupon rate remains same throughout the term of the bond. Only yields of the bond change with interest rates which has an effect on the bond prices as well. Thus, there is an inverse relationship between the bond yield and its price.

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