Sovereign Debt to GDP and Sovereign Bond Yields: Evidence from India

This paper investigates the impact of sovereign debt to GDP on the yields of sovereign bonds across different maturities of India from 2000 to 2017 comprising of 18 years of sample period. The empirical analysis was performed on the yearly data of debt to GDP and yields of sovereign bond across different maturities of India by applying regression analysis. It was found that debt to GDP is affecting yields of sovereign bond indices of medium term and long term however, it was noticed that there is no impact of debt to GDP on short-term bond yield of India. The results indicate that one point percentage increase in the stock of debt to GDP will lead to decrease of 33.8, 35.2, 37.3, 41.5 and 42.5 base points in 3-, 5-, 10-, 15- and 30-year bond yields of India.