The purchases, which were concentrated in May and June, occurred in parallel with the rise in yields, at a time of weak credit demand. Banks’ 7  investments help to stabilize government bond prices in periods of heightened tension and can enable subsequent capital gains if prices recover; however, they expose intermediaries to the risks associated with further drops in prices.
Deepak Mohanty: Economic and financial developments in Mizoram Speech by Mr Deepak Mohanty, Executive Director of the Reserve Bank of India, at the Aizawl Club, Mizoram, 19 December 2013. *  *  *  The assistance provided by P.K. Nayak, S. Suraj and S. Nath is acknowledged.