Mumbai: US Treasury yields surged on Tuesday as higher-than-expected inflation strengthened expectations that the Federal Reserve could raise interest rates in December. The benchmark 10-year Treasury yield crossed 5% during trading before easing to 4.992 percent, up 13 basis points.
The 30-year Treasury yield climbed over nine basis points to 5.352 percent, reflecting renewed selling pressure in government bonds.
Treasury Yields Surge
The two-year Treasury yield, particularly sensitive to Federal Reserve policy expectations, jumped more than 18 basis points to 4.736 percent.
This marked its sharpest increase since April 2025, as investors reassessed the outlook for US interest rates.
Inflation Exceeds Forecasts
US consumer prices increased 0.4 percent in October, exceeding economists' expectations of 0.3 percent. September inflation stood at 0.6 percent.
Core inflation, excluding food and energy, rose 0.3 percent, against forecasts of 0.2 percent.
Federal Reserve Governor Christopher Waller indicated that a 50-basis-point increase could be considered in December if inflation remains elevated.
Goldman Sachs Asset Management's Lindsey Rosner suggested that persistent inflation could keep interest rate increases on the table through 2027.
Weak Bond Auction
Selling pressure intensified following a USD 42 billion auction of 10-year Treasury notes.
Weak investor demand forced dealers to retain approximately 10 percnet of the issuance, the highest proportion since May.
Meanwhile, Brent crude briefly slipped below USD 90 per barrel before settling at USD 91.49, down 1.17 percent, following comments from US President Donald Trump suggesting the Iran conflict could end soon.
Impact On India
Higher US bond yields could create challenges for Indian equities by making American government securities more attractive to global investors.
Foreign portfolio investors may reduce exposure to emerging markets, potentially pressuring Indian share valuations.
A stronger dollar could also weaken the rupee if foreign investors withdraw funds from domestic markets.
Indian government bond yields may face upward pressure as global borrowing costs increase.
However, softer crude oil prices could offer relief to India's inflation outlook and import costs.
Investors will closely monitor upcoming US wholesale inflation figures for further indications of the Federal Reserve's December policy decision and its implications for global markets.
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