IMPACT OF POLITICAL REGIME CHANGE ON GOVERNMENT SECURITIES YIELD AND YIELD CURVE: A STUDY OF INDIAN GOVERNMENT SECURITIES MARKET

Abstract

The paper analyses the impact of political regime change from United Progressive Alliance (UPA) to National Democratic Alliance (NDA) on the short, medium, and long-term government securities’ yield and slope, level, and the curvature of yield curve. Data on government securities yield is extracted from the Reserve Bank of India’s database on Indian economy. Results show that average yields of all the maturities, slope, level, and curvature are higher during the NDA regime than in the UPA regime. Results also show that during NDA, the standard deviation increases for one, five, ten-year G-Secs' yield and level and decreases for 15-91 days' treasury bills yield, slope, and curvature. This increase or decrease is significant, as shown by the p-values of the F-test, except for 15-91 days' treasury bills yield. The results also state that excluding slope, the impact of political regime change is significant on the average yield of all maturities and yield curve.