The narrowing spread in yields between US 10-year treasury bonds and Indian 10-year government securities, nearly the lowest in 20 years, is likely to have an impact on foreign portfolio investor (FPI) inflows into India's government debt and could even lead to outflows, according to economists and market experts.
US 10-year yields have moved up following the US Federal Reserve's hawkish tone, revising its guidance on possible rate cuts in calendar year 2025 to 50 basis points (bps) from 100 bps earlier, and raised the inflation forecast after cutting rates by 25 bps, which was in line with market expectations, leading to a surge in US yields.
Indian 10-year government securities closed at 6.78 per cent while US 10-year treasuries were trading at 4.54 per cent. The spread stands at 224 bps, the lowest since April 1, 2005.
According to Gaura Sen Gupta, chief economist, India First Bank, this could lead to FPI outflows from Indian government debt.
This story is from the December 20, 2024 edition of Business Standard.
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This story is from the December 20, 2024 edition of Business Standard.
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