GS 3
Category: ECONOMY
- Negative Yield Bonds
The issue in news
Recently, demand for negative yield bonds is on rise in the global market.
Main points
Negative Yield Bonds: A negative bond yield is when an investor receives less money at the bond’s maturity than the original purchase price for the bond.
- A negative bond yield is an unusual situation in which issuers of debt are paid to borrow.
- In other words, the depositors, or buyers of bonds, are effectively paying the bond issuer a net amount at maturity instead of earning a return through interest income.
- Bond: Is an instrument to borrow money. A bond could be floated/issued by a country’s government or by a company to raise funds.
- Yield: The yield of a bond is the effective rate of return that it earns. But the rate of return is not fixed; it changes with the price of the bond.
Reasons behind buying Negative Yield Bonds:
- To create a diverse portfolio
- To use them as collateral
- To take Benefit from Currency Gain
- To Avoid Domestic Deflation Risk
- To Create Safe Haven Assets
WHY DO INVESTORS BUY THEM?
- Negative-yield bonds attract investments during times of stress and uncertainty as investors look to protect their capital from significant erosion.
- Investors are looking for relatively better-yielding debt instruments to safeguard their interests.
WHY IS THERE A HUGE DEMAND?
- The fact that the 10-year and 15-year bonds are offering positive returns is a big attraction at a time when interest rates in Europe have dropped significantly.
- Also, it is important to note that while the majority of the large economies are facing a contraction in their GDP for 2020-21.
- China is one country that is set to witness positive growth in these challenging times: its GDP expanded by 4.9% in the third quarter of 2020.
KEY FACTOR DRIVING THIS DEMAND
- It is the massive amount of liquidity injected by the global central banks after the pandemic began.
- This has driven up prices of various assets including equities, debt and commodities.
- Single window approval for FDI by Mar.
The issue in news
A new, unified single-window clearance system for foreign direct investment (FDI) proposals would be in place by March 31, 2021.
- Access to regulators, policymakers and facilitators are all available at one point, digitally.
- This would not only make approvals transparent but expeditious.
- The single window clearance system being developed will be ‘very effective’ and enable the potential investor to interact with all the ministries whose approvals are required, at the Centre as well as in the States.
Note:
- The Finance Minister stressed that the Centre would continue the momentum of reforms undertaken during the pandemic.
- Centre’s industrial information system for potential investors includes details of land availability in as many as 14 states.
Category: SCIENCE AND TECHNOLOGY
- China prepares probe to bring back lunar rocks
The issue in news
China is preparing to launch an unmanned spacecraft to bring back lunar rocks.
Main points
- It is the first attempt by any nation to retrieve samples from the moon in four decades.
- If successful, China will be only the third country to have retrieved samples from the moon, following the U.S. and the Soviet Union in the 1960s and 1970s.
- The Chang’e-5 probe (named after the mythical Chinese moon goddess) aims to shovel up lunar rocks and soil to help scientists learn about the moon’s origins, formation and volcanic activity on its surface.
- The Chinese probe is expected to collect 2 kg of surface material from a previously unexplored area known as Oceanus Procellarum or “Ocean of Storms” which consists of a vast lava plain.
Note:
Beijing is investing largely in its military-run space programme, with hopes of having a crewed space station by 2022 and eventually sending humans to the moon.
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