Fed’s Outcome Pushes India 10-year Bond Yield to 25-Month High; Rupee Weakens

By Malvika Gurung

Investing.com -- The US Federal Reserve released its stance on curbing soaring inflation, which stands at its highest in almost 40 years, indicating to raise interest rates in March, followed by its plan to end bond purchases in the month.

As a result of the Fed’s tightening monetary policy, India's benchmark 10-year bond yield India 10-Year rose to its 25-month high on Thursday, while the domestic currency rupee USD/INR fell to its lowest value in a month.

The domestic benchmark 10-year bond yield surged to 6.71%, up 5 bps from its last closing level, also its highest level since Dec 2019, i.e., in over 2 years.

In response to the Fed’s hawkish stance post the 2-day policy meet on Wednesday, the US dollar US Dollar Index soared against most major currencies. The dollar index that measures the greenback against six major currency pairs, recorded a fresh multi-week high at 96.62.

Consequently, INR weakened against the greenback at 75.17/$1, while writing this report.

Besides, as the Reserve Bank of India announced no fresh rounds of bond purchases, dealers expect sovereign bond yields to harden even further ahead of the Budget announcement on February 1, stated an ET report.