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Chart of the Day | The impact of a Fed taper on US real yields and the EM carry trade

If US real rates trend higher ahead of potential tapering, then EM FX could be affected, hurting inflows to emerging markets

June 21, 2021 / 10:03 AM IST
Chart of the Day | The impact of a Fed taper on US real yields and the EM carry trade

Why is the US 10-year yield so low? The accompanying chart shows that the real yield on 10-year government bonds in the US is -3.4 per cent, much lower than in other countries. If US growth is really as strong as the indicators say it is, shouldn’t real yields be much higher? (image) There could be several reasons for the low yield. One, the markets believe, together with the Fed, that the spurt in inflation is transitory. Two, they believe...

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