Bond yields spike amid bets of interest rates staying higher for longer; how will it impact Indian stock markets?

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Also Read: Inclusion of Indian bonds in JPMorgan bond index to have limited impact on Indian bonds, rupee, says ASK Wealth Strong economic data in the US and hawkish comments from the US Federal Reserve officials have raised bets that the interest rates will remain higher for longer, leading to a spike in bond yields. US job openings unexpectedly rose in August, pointing to tight labor market conditions that could compel the Federal Reserve to raise interest rates next month, with the odds rising above 30%, Reuters reported.

According to the Labor Department’s monthly Job Openings and Labor Turnover Survey, or JOLTS report, job openings jumped 690,000 to 9.610 million on the last day of August. Additionally, US Federal Reserve officials say that monetary policy will need to stay restrictive for “some time" to bring inflation back down to the Fed’s 2% target.

“I remain willing to support raising the federal funds rate at a future meeting if the incoming data indicates that progress on inflation has stalled or is too slow to bring inflation to 2% in a timely way," Fed Governor Michelle Bowman said Monday. Cleveland Fed leader Loretta Mester also said the Fed’s work is likely not done.

“I suspect we may well need to raise the fed funds rate once more this year and then hold it there for some time as we accumulate more information on economic developments and assess the effects of the tightening in financial conditions that has already occurred," Mester said in a speech to a group in Cleveland. (Exciting news! Mint is now on WhatsApp Channels Subscribe today by clicking the link and stay updated with the latest financial insights! Click here!) Rising bond yields have spooked the stock markets as investors tend to shift away