Worldwide bond yields rise amid prospects of rising interest rates
- Central banks around the world are considering raising interest rates to curb skyrocketing inflation following the Corona epidemic, not to mention India. The rise in bond yields has been attributed to higher inflation in the country, rising fiscal deficit, trade deficit, concerns over growth in industrial production and rising credit-to-deposit ratios of banks. Let us now discuss in detail how an increase in bond yields will affect equity investors. What are bonds and bond yields? Bonds are basically a receipt of a loan in which an investor lends money which is usually corporate or government. Simply put, bonds are a means of lending, allowing various institutions, such as corporates and governments, to raise funds from the market. Bonds are traded like stocks. As companies / governments issue bonds to raise money, they pay fixed interest to bondholders known as coupon rate. Bonds are traded in the same way as stocks. This return is called bond yield. For example, if an investor