Uday Kotak warns of interest rate roller coaster as yields surge

"Be ready for a roller coaster ride in interest rate markets!" cautions Uday Kotak as Japan 10Y yield crosses 3%, US hits 4.8%

New Delhi, September 2

"Japan's 10 year bond crosses 3% and US 4.8%," Kotak stated on X.

At the time of reporting, the United States 10-year yield stood at 4.81 per cent, marking an increase of 0.01 or 0.17 per cent. Similarly, Japan's 10-year bond yield traded at 3.02 per cent, reflecting a gain of 0.02 or 0.71 per cent.

The veteran banker linked these market movements to widening sovereign fiscal imbalances and the authorities facing monetary policy pressures.

"As their government debt and deficits go up, central banks may have no option but to expand balance sheets (print money)," Kotak explained in his post.

"If so, inflation goes up, short end rates go up," Kotak added, detailing the chain of economic reactions.

For the Indian market, rising US and Japan yields can mean pulling away of foreign capital from the country toward safer higher-return bonds, pressuring FII flows into equities and debt.

At the time of reporting, the India 10-year benchmark bond yield traded at 6.96 per cent, recording a change of 0.01 or 0.07 per cent. At the shorter end, the India 5-year yield stood at 6.59 per cent, moving up by 0.01 or 0.09 per cent. The long-term India 30-year bond yield held at 7.56 per cent, logging a gain of 0.03 per cent.

The broader bond data outlined movements across other major global sovereign debt securities. The United Kingdom 10-year bond yield stood at 5.22 per cent, recording a contraction of 0.04 or 0.85 per cent.

In Europe, Germany's 10-year yield sat at 3.34 per cent, rising by 0.01 or 0.45 per cent, while France's 10-year yield registered at 4.21 per cent, gaining 0.03 or 0.66 per cent. China's 10-year yield traded at 1.69 per cent, showing a change of 0.12 per cent.

— ANI