Beware the ire of bond vigilantes
While stocks surge ahead, bond markets have turned bearish over the past few weeks
In mid-November 2017, when the ratings agency Moody’s upgraded India’s credit rating from Baa3 to Baa2 after a 13-year gap, most expected Indian bond market investors to rejoice, and drive down yields. Yet, owing to a number of unfavourable domestic developments, Indian bond markets have actually under-performed most emerging market peers since that upgrade, with yields on the benchmark 10-year government bonds rising by 26 basis points. A basis point is one-hundredth of a percentage point. A rise in yields reflects a fall in bond prices, and signifies losses for bond-holders.
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