India-US yield gap hits highest in a year—what's going on?
India's 10-year government bond yields are now about 2.5% higher than US Treasuries, the widest gap in nearly a year.
Usually, this would pull more foreign money into Indian bonds—especially with global index inclusion—but that hasn't really happened.
Why does this matter?
Despite the tempting returns, foreign investors are holding back.
That means less support for India's bond market and more ups and downs for the rupee.
The hesitation comes from worries about currency swings, trade tensions (like possible new US tariffs), and an oversupply of long-term Indian bonds.
What's behind the widening gap?
A weaker rupee means investors want extra compensation for currency risk, pushing up Indian yields.
Rising Japanese yields have also made Indian debt less appealing globally.
Still, experts say these shifts look temporary—not a sign of deeper trouble for India's economy—and things could settle if trade policies get clearer or central banks step in.