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Signals from the debt market: Staying invested in equities is important

A steep yield curve has been followed by a bull run in equities on a couple of occasions in the past

10-year bond yields rise, may become tough for banks to pass on rate cuts
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While it is good to take precautions, we should not forget the lessons of history. Bull markets are born in the depths of pessimism

Ashutosh Wakhare
While yields on short-term Indian government bonds are falling like there is no tomorrow, those on longer-term bonds remain sticky. This has led to a steep yield curve – the sort that the country has not witnessed at least in the past two decades. A steep yield curve has implications for investors. The country has witnessed steep yield curves twice in the past, and each such occasion was followed by a stunning bull run in equities. To quote a popular saying, history does not repeat itself but it does tend to rhyme.
 
The first instance: Between 2003 and 2005, yields

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First Published: Jun 13 2020 | 10:01 PM IST

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