Sharp rise in bond yields in US, domestic market takes shine off equities

The decline in spreads has been accompanied by a sell-off in equities by foreign portfolio investors (FPIs)

A sharp rise in bond yields in the United States and the domestic market in the past one year is reducing the attractiveness of equity over fixed-income assets such as bonds. This shows in the declining spread between the Sensex earnings yield and that on the US 10-year government bond.

The spread has declined to a three-year low of 108 basis points against 149 basis points in April 2021 and a post-pandemic high of 468 basis points in April 2020. The current spread is less than half the 15-year average spread of 239 basis points. One basis point is one-hundredth