As rupee falls, spread between India and US bond yields tightens

In comparison, the recent decline in the yield spread is because bond yields in the US have risen faster than in India

The Reserve Bank of India (RBI) may have to ultimately raise interest rates to stem capital outflows from India and shore up the rupee that continues to depreciate at a steady pace. The yield spread between the 10-year Government of India (GoI) bond and the benchmark US Treasury remains low when compared with the historical average.

The yield on the benchmark GoI bond is currently 447 basis points higher than that on the 10-year US treasury bond; this is 81 basis points lower than the historical average spread of 528 basis points since 2010. In fact, the yield spread was