resulted in the development of several benchmark securities, • a high degree of sophistication achieved in the auction process has narrowed the gap between the cut - off price and the weighted average cut - off price and has resulted in a strong correlation between the bids at the primary auction and secondary market yields, indicating improved price discovery. • the increased volume of trading in the secondary market has resulted in a reasonably smooth yield curve ; • the yield curve has been elongated up to 30 years maturity to reduce bunching of redemptions and minimise the rollover risk ; • through a process of novation, a central counterparty, like the clearing corporation of india limited ( ccil ) has provided excellent infrastructure and contributed to better risk management. • to address important issues regarding pricing, choice of benchmark, and liquidity in respect of floating rate bonds ( frbs ), a sub - group of the technical advisory committee on money, forex and government securities markets has been constituted. • rbi has enhanced the efficacy of nds by incorporating screen based anonymous order matching system under its ambit with effect from august 1, 2005. given this backdrop, let me now turn to some of the recommendations made by the technical group on government securities which are under examination. first, since rbi would not be able to participate in the primary auction market with effect from 2006 - 07, an internal technical group in rbi examined and recommended an appropriately restructured primary issuance process. the technical group suggested that primary dealers ( pds ) may have to take up a greater role in underwriting and may accordingly need to underwrite 100 per cent of the notified amounts in future auctions. second, the larger responsibility cast on the pds may need to be compensated with appropriate incentives and one of the suggestions is to extend exclusivity in auctions, which is a typical feature in most countries with pd system. however, another view is that this may disadvantage other players in the government securities market who have been participating directly in auctions. third, pds are also required to play the role of market - makers by always offering two - way quotes, thereby imparting liquidity. however, it has been represented that the absence of short sales constrains the market - making role of pds. the issue for consideration is whether short sales, with appropriate safeguards would be necessary for pds to play this role of market - making. fourth, a numbers of challenges have emerged in monetary and debt management : to

and the loss of confidence in the building blocks of the financial system, its impact was magnified through quick transmission to other economies as well. monetary authorities in the advanced economies were the first to resort to aggressive monetary easing first by reducing policy rates. however, key channels of conventional monetary policy were severely impaired during the crisis as policy rates in most advanced economies approached zero lower bound ( chart 1 ). bagehot walter ( 1873 ), lombard street : a description of the money market, king & co., london ; reprinted wiley, new york 1999. bis central bankers ’ speeches taking cognisance of the severity of the crisis and concerns of economic recession, central banks used their balance sheets in unconventional ways to augment liquidity ( table 1 ). the qe programmes initially attempted to alleviate financial market distress, but this purpose soon broadened to include achieving inflation targets, stimulating the real economy, and containing the european sovereign debt crisis ( fawley and neely, 2013 ) 2. now let us discuss a little about the rationale for unconventional policies undertaken across major economies. table 1 fawley, brett w. and christopher j. neely ( 2013 ), “ four stories of quantitative easing ”, federal reserve bank of st. louis review, january / february, vol. 95, no. 1. bis central bankers ’ speeches in the us, immediately after the collapse of lehman brothers, when slow growth and high unemployment emerged as major concerns, the fed announced the policy of quantitative easing ( qe ) in november 2008. the first two rounds of qes reactivated financial markets, but failed to spur growth. under “ operation twist ” instituted in september 2011, the fed took initiative of buying longer - term treasuries and simultaneously selling some of the shorterdated securities to bring down long - term interest rates which continued till december 2012. with a view to putting in place a stronger version qe, it launched qe3 in september 2012. under qe3, the fed started purchasing us $ 85 billion of fixed - income securities per month. the fed intended to keep qe3 in effect until unemployment falls to 6. 5 per cent or inflation rises to 2. 5 per cent. in addition to qe3, the fed gave a forward guidance that it would keep short - term rates low through 2015. as economic parameters showed improvement, the fed started talking about exit, popularly known as the tapering of bond buying in may 2013. subsequently, it announced to