Spike in US bond yields impacting capital flows to emerging markets like India

New Delhi, August 22 A sharp spike in US bond yields is impacting capital flows to emerging markets like India, says V. K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

There are two dominant factors influencing equity markets now.

One, the resilient US economy is supporting global growth and global equity markets; this is a positive. Two, the sharp spike in US bond yields (the 10-year yield at 4.34 per cent is the highest since 2007) is impacting capital flows to emerging markets like India; this is a negative for Indian markets, he said.

Sustained rise in FII inflows will happen only if the US bond yields decline. Clarity on this will emerge only after trends in US inflation and the Federal Reserve’s monetary stance indicate softening.

Investors should wait for clarity on these macro trends, he added.

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