Global Economy: Why are Japan and US bond yields rising & what is the situation of India?
Global Economy: There is turmoil in the bond market around the world. According to a media report the 40-year Japanese government bond reached a new record on yesterday. While the yield on 30-year treasury bond in the US crossed 5 percent. While the Capital Mind CEO Deepak Shenoy said through a post on X on May 20 that something terrible is happening in the debt market around the world (although the situation in India is fine) and the yield is increasing. The reason for this problem will be Japan.
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Rising bond yield in Japan impacts US bonds
Vishal Goenka, co-founder of Indiabonds.com, estimates that rising bond yields in Japan can have a profound impact on US bonds as well. Since Japan is one of the largest buyers of US bonds worth $1.13 trillion.
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According to The Mint report, he said, "The fear is that Japanese investors can now sell UST and buy JGBs. This has not been seen since 2000." Here just keep in mind that the yield decreases when the price of a bond increases and the yield increases when the price of a bond decreases.
India's position is strong
During this time, India's position remains good. Inflation is under control. The foreign exchange reserves are $691 billion. In such a situation, India can deal with any crisis in the global economy in a better way than other emerging markets. However, Goenka warned that India is unlikely to remain untouched by the growing impact of the rise in government bonds.
What is the reason for the rising bond yield?
The effect of rising US bond yields was seen on Tuesday itself. During this period, there was heavy selling by foreign investors. Due to this, there was an outflow of Rs 10,000 crore from the Indian stock market. The Chief Investment Strategist of Geojit Investment warned that if this continues, it is likely to affect the market.
He also gave several reasons responsible for this - the fall in the credit rating of US sovereign debt, the resulting rise in US bond yields, the rise in Japanese government bond yields, rising Covid cases in some parts of India and the possibility of an Israeli attack on Iran, etc.
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