The YTM for a security having residual maturity of 10 years has been fixed at 12.05 per cent against 12.15 per cent as on March 31, 1998, resulting in `incremental value generation' of 0.10 per cent for these securities.

The YTM for one year maturity has also been fixed lower at 10.07 per cent against 10.59 per cent as at the end of March 1998. However, YTM for two and three year maturities has been fixed higher at 11 per cent and 11.17 per cent as on end-March 1999, against 10.83 per cent and 11.09 per cent last year, respectively.

RBI has also announced YTM for over 10 years up to 20 years and beyond. The YTM for 20 years and beyond has been fixed at 12.50 per cent, compared to 12.60 per cent at which a security of such maturity period was issued in 1998-99.

``The YTMfixed is very realistic and on expected lines,'' a Standard Chartered official said, citing the trades in the secondary market for a 10-year maturity paper having taken place at 15.05 and 12.06 per cent on March 31, 1999.

RBI, in a statement, said the YTM for four year paper would be 11.32 per cent, for six year 11.63 per cent, seven year 11.74 per cent, eight year 11.84 per cent and nine year 11.94 per cent.

RBI said any net appreciation in the value of securities should be ignored, while the net depreciation should be fully provided for. RBI has fixed the YTM for 11 years at 12.13 per cent, for 12 years 12.18 per cent, for 13 years 12.24 per cent, for 14 years 12.29 per cent, for 15 years 12.33 per cent, for 16 years 12.37 per cent, for 17 years 12.40 per cent, for 18 years 12.44 per cent and for 19 years 12.47 per cent.

Analyst with ICICI Securities M R Madhavan said the YTM curve's impact on banks' profitability would not be much as the curve is in alignment with last year's. For individual banks,there may be appreciation or depreciation depending on the composition of the securities portfolio, he said.

A treasury manager with a large public sector bank said for securities of 11 years and above maturities, some provision would have to be made because of depreciation. But for up to 10 year maturities, there would be some positive increment in values, he said.

``If we are going to gain something and that gets set off, then its fine,'' the treasury manager said, adding ``the scope to write back (provisions made for depreciation in securities in 1997-98) has been minimised.''

RBI said the yield curve also applies to state government securities and government guaranteed securities, while the six per cent capital indexed bonds maturing in 2002 should be valued at cost.

RBI has also stated the method of valuation of PSU bonds. Banks will have to mark to market taxable and tax-free non-priority sector PSU bonds at two per cent above YTM and one per cent below YTM respectively and taxable and tax-freepriority sector PSU bonds at two per cent below YTM and at YTM on government securities.