Yield to the bonds.

On 15 August 2025, "Ask almost any economist and they will tell you," that US President Donald Trump's "tariffs and crackdown on immigrants risk a return of 1970s-esque 'stagflation', when a sudden oil shock prompted stagnant growth and spiraling prices, except this time the crisis would be self-inflicted." "But after a busy few weeks of company updates, data on jobs and inflation, we still don't really know." BBC. The Iran war's economic ripple-effects, spike in inflation, job market wobbles and a sharp decline in consumer confidence "now risk pushing the economy toward stagflation - a combination of high inflation and weak growth," wrote Roger W Ferguson Jr. However, even though economic growth is down to 2.1% in 2025, "Among the Group of Seven nations, the US recorded the strongest growth." cfr.org. Yield on the 30-year US Treasury "rose as much as 5 basis points (bps) to 5.53%." "The 10-year note's yield also reached a multi-year high exceeding 5.22%." MC. India's economy is not linked to that of the US, we have a separate currency and a different central bank. But, "Rising global borrowing costs and elevated oil prices extended Indian government bonds' losing streak to a sixth week," as "The benchmark 6.94% 2036 bond yield rose 1 bp to 7.1194%...about 36 bps over six weeks." ET. This means an increase in the cost of borrowing for the government. "Govt will raise nearly Rs 7.9 trillion from securities in the second half of this fiscal year, reducing the total borrowing for the current financial year by Rs 1,204.94 billion." TOI. Multiplying an insignificant 36 bps by 7.9 trillion is a lot of money. The yield on the 30-year US Treasury is the highest in 22 years and the 10-year yield is the highest since 2007. "And when the world's benchmark bond starts offering investors a much higher return, the effects can travel from Washington to Mumbai, affecting the rupee, India government bonds and the RBI's room to maneuver." "An Indian bond, for instance, has to offer enough additional return over a US Treasury to compensate investors for the extra risks of holding an emerging market asset, including currency risk." ET. "FII (Foreign Institutional Investors) outflows from India have crossed Rs 1.51 trillion in 2026 as foreign investors shift money to relatively cheaper global markets. Rising US bond yields, a weaker rupee, higher crude oil prices and expensive Indian stock valuations are the main reasons behind this trend." Bajaj Finserve. "The rupee is likely to remain in the Rs 94.5-96 per US dollar range in the near term, with large dollar inflows through FCNR deposits and external commercial borrowings (ECBs) failing to translate into commensurate appreciation." "The rupee has depreciated by around 28%, moving from an average of Rs 74.44 per dollar in January 2022 to Rs 95.47 in August 2026." In the same period, the yen depreciated by 30%, the Indonesian rupiah by 24% and the South Korean won by 17%. ET. Between 2015 and 2025, FIIs have been net sellers in nine out of the 11 years and net buyers in just two - 2019 and 2022. On the other hand, domestic investors (DIIs) have been net buyers in 10 out of the 11 years, often by amounts much higher than FII selling. Moneyvesta. Thus domestic buying increases the price of stocks, giving greater returns to FIIs when they sell, while the RBI's support for the rupee gives them more dollars in exchange when they repatriate their profits. Despite all these gifts the US government and the Federal Reserve may, most likely will, continue to create problems for us. We are tied to their bonds. We have to yield.