Sensex earnings yield gap with 10-year US treasury bond turns negative

A negative spread between Indian equity yield and US long-term Treasury bond makes Indian equities less attractive for foreign investors and may lead to a selloff by FPIs

The Indian equity market is likely to feel the pinch of the recent rise in the benchmark government bond yield in the United States. 

The 10-year US Treasury yield has shot up by around 12 per cent, or nearly 50 basis points, since the start of this calendar year, with the majority of the rise happening in just last week. And this the spread between the Sensex earnings yield and the US benchmark bond yield from positive to negative, a shift that hasn't been seen in the past two months.

Currently, the Sensex is trading at an earnings yield of