The determinants of the yield (interest rate) on bond market
securities are :
- Prevailing interest rates in the economy : The yield of bonds
is purely based on the interest rates prevailing in the
economy.
- Inflation rates of the economy : The level of money supply in
the economy also affects the yield of the bonds.
- Future interest rate expectations : Expected changes in the
interest rates affect the yield.
- Economic growth : Growth or depression in the economy affects
the interest rates of bonds
- Monetary policy of the government : Monetary policy is
exercised by the central banks to regulate the money supply in the
economy. It will affect the yield of bonds.