Photo: BloombergFalling long-term bond yields are a sign of well-anchored inflation expectations or so goes the adage. Even the RBI’s survey of households on inflation expectations is showing that Indians expect inflation to quicken going ahead. Bond yields remained stubbornly at elevated levels despite retail inflation print dropping from 8.6% in January 2014 to 5.63% in September that year. Fast forward to today, bond yields have dropped by 40 basis points since April although retail inflation has been inching up every month since then. The question is: can liquidity permanently decouple long-term bond yields from inflationary expectations?

Source: Mint September 05, 2016 05:37 UTC