Indian bond yield rises as U.S bond yield tops 4%, highest since 2010 level

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Mumbai: The 10-year yield traded around 3.984% up from the previous closing level of 3.96%, crossing levels last seen in 2010. The two-year U.S. Treasury yield also reached a 15-year-high. The rise in yield was triggered by towering expectations for Federal Reserve interest-rate increases and stickier inflation. 10-year U.S. Treasury yield hitting 4% for the first time since April 2010 also took a hit on Indian bond yields. The benchmark Indian 10-year government bond yield was at 7.327% after gaining from the previous close of 7.292%.
Lawrence Summers, the former US Secretary of the Treasury commented ” The US 10-year rate just crossed above 4%. Mortgage rates comfortably exceed 7%. We are now in the new financial territory”
Top economist Mohamed EL Erian said “ This is a cautionary sign for all those tempted to call an end to the turmoil in UK financial markets. On the back of today's surge, the yield on 30-year UK government bonds is now above 5%, at a level last seen in 1998. And to think we were below 4% less than a week ago”
The U.S. dollar index rose to hit a new high of 114.70. The Indian rupee hit a new record low as the dollar soared to fresh highs. The rising US bond yields and the dollar's pressure on global currencies raise the possibility that other countries will raise interest rates denting economic growth.
Indian investors are pricing in a hawkish stance from the Reserve Bank of India, in line with global cues. The RBI's policy decision is due on Friday, with 26 of 51 economists in a Reuter’s poll predicting a 50-basis-point hike, which would take the repo rate to 5.90%.
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