US yields rise as investors pare back Fed cut bets

Higher US yields make dollar-denominated assets more attractive, potentially leading to FII outflows from Indian markets. This can impact banking sector liquidity and credit growth, while IT companies may face currency headwinds if the Rupee weakens significantly.

• •U.S. Treasury yields climbed on Thursday, particularly at the short end.
• •Investors significantly reduced Federal Reserve rate-cut expectations for the year.
• •The central bank's hawkish stance and flagged inflation risks, exacerbated by the Middle East conflict, led to this shift.
• •Policymakers now anticipate less easing, with investors pricing in minimal cuts by December.
• •Risk flag: Further escalation of Middle East conflict