US 10-Year Yield Hits 5%, Weighing on Emerging Markets

The US 10-year Treasury yield briefly crossed 5% on Monday, its highest level since October 2023. The move reflects a path of higher fiscal deficit, heavier debt burden, and inflation expected to remain above the Federal Reserve's target for 'five years plus'. According to Nilesh Shah, MD at Kotak Mahindra AMC, 'the market rates will be ahead of policy rates and policy predictions.'

Harsimran Sahni, EVP and Head, Treasury at Anand Rathi Global Finance, called the 5% print a 'significant technical threshold'.

The Reserve Bank of India has been closely watching the Fed's moves and using open market operations (OMOs) to manage current liquidity conditions. Foreign institutional investors have turned net sellers in Indian equities again in September, offloading about Rs 14,475 crore so far.