RBI Holds Rates as US Treasury Yields Approach Historic Levels

Steven Englander, Managing Director and Global Head of G10 FX Research at Standard Chartered Bank, expects the Reserve Bank of India (RBI) to hold interest rates unchanged this week due to mixed economic data. He believes that even if inflation data is supportive, the RBI may not be able to justify a rate hike.

However, Englander warns that US 10-year Treasury yields could still move closer to 5%, driven by growing concerns over government borrowing and AI-driven credit demand rather than expectations of another Federal Reserve rate hike. He notes that the rise in long-term US Treasury yields reflects legitimate worries about increasing debt.

The recent US intervention in the yen has had a significant impact on currency markets, with Englander expecting continued influence in the near term. The intervention was described as 'a funny sort of intervention' because it was announced in advance, and its effectiveness may wear off over time.