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US Presidential Interference: President Trump challenged the independence of the Federal Reserve (Fed), creating uncertainty in financial markets. His conflict with the Fed chair increased investor fears about inflation.
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Bond Basics: Bonds are debt instruments promising fixed returns, viewed as safer than equities. Bond yields are inversely related to bond prices.
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Inflation Impact: Inflation erodes bond returns. Rising inflation expectations cause central banks to raise interest rates, lowering bond prices and increasing yields.
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Currency Risk: Currency depreciation negatively impacts foreign bondholders’ returns.
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US Market Reaction: Investors are selling US bonds due to fears of inflation from tariffs. Rising yields and a falling dollar suggest investors are moving away from US assets.
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Capital Flight: The US losing its safe haven status could lead to capital flight from emerging markets seeking stable currencies and markets.
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Indian Bond Market: It’s a vital segment where entities raise funds via bonds. It includes primary (new issues) and secondary (trading existing bonds) markets, with instruments like G-Secs, corporate bonds, and green bonds. RBI regulates government bonds, SEBI regulates corporate bonds.