The government announced the interest rates for small saving schemes yesterday and surprising or should I say unsurprisingly, the interest rates of many schemes, especially the long-term ones like PPF and Sukanya Samriddhi are still too high! Why is the government not sticking to policy?

If you are surprised by the title in spite of the fact that rates have headed south this year, an explanation is provided below. But first, a look at the entire list of revised rates.

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Tracking gold-price movements in terms of USD and INR is a simple, but intuitive way to understand the strength of our economy. Here are some observations from staring at the historical gold price movement in USD and INR. The domestic price of gold, that is INR is the  equivalent price in USD times the exchange rate.

This has resulted in some fascinating price movement. First, let us look at the normalised (all set to 1 at the start) movement of the price of one troy ounce (31.1 gms) of Gold in USD, INR and the exchange rate (per dollar) derived from these prices.

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Here is what you should know before buying sovereign gold bonds either in the primary market (when the next tranche is released) or secondary market (1st tranche issued in Nov 2015).

In my opinion, there is only one thing that someone buying paper gold should know: just how volatile returns can be!!

The fin min says

They will carry sovereign guarantee both on the capital invested and the interest.

This does not mean returns are guaranteed!!

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Tax-free bonds are purchased in the secondary market via a Demat account when either new ones are not available or not attractive. How does one decide between buying existing tax-free bonds and new ones? Should we just look at the coupon rate and choose the one which is higher?

It depends on the purpose of the purchase. If someone is buying these bonds,

1. for income after retirement, then higher coupon rate may be the only thing that matters. There is no point comparing old bonds with new ones. If a higher payout is necessary then a premium may have to be paid to buy old bonds in the secondary market. Whether they will be available for sale or not is another matter!

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A discussion on how the term spread, which is the difference between the 10-year & 3-month government bond yield, can be considered as a macroeconomic indicator

A macroeconomic indicator is one which gives an indication about the current state and future trend in the economy. Macroeconomic indicators can be used to change the asset allocation in a portfolio to safeguard losses or increase returns.

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