Moneycontrol decodes what a likely increase in interest rates in the US means for India.
"The rapid rise in yields could make the Federal Reserve nervous especially if it nears the 2.9 percent mark," said Kathy Lien, managing director of FX Strategy at BK Asset Management.
Squabbling in Washington over the debt ceiling is again raising the specter that the United States may be forced to delay payments on its debt. While the stigma of a default would be damaging enough to investor sentiment, the chaos from a breakdown in financial markets' systems that might result would be even scarier.
Ultra-low interest rates on US government bonds, the benchmark against which most debt is measured, have driven down borrowing costs around the world. That has been a boon to corporate borrowers who are finding plenty of yield-hungry investors willing to extend long-term credit.
Though the government surprised people by biting not just one reform bullet but many in just 48 hours over the weekend, the question now is: Will the RBI governor walk the much-needed monetary extra-mile on Monday or will be weighed down by the 68 bps spike in August inflation?
US job growth braked sharply for a third straight month in May and the unemployment rate rose for the first time in nearly a year, raising chances of further monetary stimulus from the Federal Reserve to support the sputtering recovery.
Bears are in the fray and sparing none, not even Indian market. Experts feel that the downtrend is likely to continue for some more time. On the fear of another downgrade post the US, markets across countries are facing severe selling pressure.