Yields on Indian government bonds rise

30 Aug 2022 , 08:27 AM

On Monday, Indian government bond yields increased in tandem with U.S. Treasury yields as the U.S. Fed emphasised that it will continue raising rates to control inflation. At the close, the benchmark yield on 10-year government bonds was 7.2534%. The yield dropped seven basis points on Friday. Following a Friday close of 7.2049%, the new 10-year 7.26% 2032 bond yield ended at 7.2347%.

Jerome Powell, the chair of the U.S. Federal Reserve, said on Friday that rates will be maintained higher for longer to reduce inflation, which has raised fears about similar actions by the Reserve Bank of India domestically (RBI). Early on Monday, the yield on the 10-year U.S. Treasury increased to 3.11%, while the yield on the two-year Treasury shot up to 3.4702%, its highest level in over 15 years.

Since March, the Fed has increased interest rates by 225 basis points. The next policy announcement by the RBI is scheduled on September 30. Between May and August, rates were increased by 140 basis points. Consumer inflation in India has persistently remained over 6% for seven months.