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How do government bonds affect the stock market?

Government bonds are debt instruments issued by governments, in which the lender lends money to the government for a fixed time period.

Bond yields are returns you get when you buy a bond and they move in opposite directions; when bond prices rise, yields fall, and when bond prices fall, yields rise.

The bond market and stock market influence each other as higher bond yields can lead to profit-booking in the equity market.


India's benchmark bond yields closed 0.08% lower at 7.31% on February 7 due to FM's announcement of lower-than-expected borrowing numbers during the Budget.

Some examples of government bonds are treasury bills, sovereign gold bonds, dated government securities, cash management bills etc.

Investors who want to adjust their investments according to the market situation can go for dynamic asset allocation mutual funds or balanced advantage funds.

Bonds are also used to regulate the money supply in the system.

Governments need funds for various purposes such as to finance the fiscal deficit or fund large infra projects and they issue bonds when they need a significant amount of money.

Click here to read more about government bonds

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How do government bonds affect the stock market?

Government bonds are debt instruments issued by governments, in which the lender lends money to the government for a fixed time period.

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