Where interest rates are liberalised and debt management and monetary policy functions are with the central bank, policy coordination needs to be maintained between the Government Securities and money markets. In regard to the money market in India, the basic objective in recent years has been to develop a short-term yield curve with deep liquidity. A four-fold strategy has been adopted in this regard.
Fiscal policies should support the modest economic recovery and ensure debt sustainability, while remaining in full compliance with the EU’s fiscal rules. With bond yields subject to volatility, high-debt countries in particular need to pay attention to risks related to a reversal of the current low interest rate environment.