A sit it out strategy

A long-term investor has to be ready to weather any storm

The bond market has been emitting bearish signals for months. Those signals got stronger as the 10-year government bond (2028) yield touched 8 per cent in early September. This was the highest yield since December 2014. 

A year ago, the benchmark bond was yielding about 6.5 per cent. The RBI has since hiked policy rates by 0.5 per cent. The excess in the bond’s yield can be explained by bearish expectations caused by rupee weakness and fears of rising government borrowings. 

Traders are braced for inflation.  Although the August Consumer Price was down, September inflation trends will definitely be higher