US Fed Moves Set Indian Bond Yields On Edge
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What’s going on here?
Bạn đang xem: US Fed Moves Set Indian Bond Yields On Edge
Rising US Treasury yields and Federal Reserve rate expectations are putting the Indian bond market under pressure, with yields inching higher.
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What does this mean?
The yield on India’s 10-year government bond rose to 6.7430% on December 16 from 6.7282%, as US Treasury yields climbed alongside meeting inflation expectations in November. This aligns with the Fed’s anticipated easing, potentially cutting rates by 25 basis points this week, though another cut isn’t expected until at least January, with only a 17% chance. Since September, the Fed’s rate cuts total 75 basis points, reflecting caution as a new US administration prepares to take office. This careful US monetary approach, combined with ongoing inflation worries, is pressuring emerging market bonds and currencies, including India’s.
Why should I care?
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For markets: Global rates ripple across borders.
The Indian bond market is feeling the heat from US rate decisions that are nudging global yields higher. This focus on Indian bonds mirrors larger market trends, and Puneet Pal from PGIM India Mutual Fund points out the persistent pressure from elevated US yields, which will likely affect emerging markets into the next quarter. Investors should prepare for sustained volatility as global rate policies exert their influence internationally.
The bigger picture: Policy shifts amid economic cycles.
India’s retail inflation drop to 5.48% in November hints at potential rate cuts by the Reserve Bank of India, possibly in February, despite recently holding rates steady and boosting liquidity through cash reserve ratio reductions. As the RBI releases meeting minutes on Friday, these insights will be key for grasping potential changes in monetary strategy. These scenarios highlight how domestic policies are adjusting in the context of broader global economic cycles and possible shifts in US fiscal leadership.
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