- Uday Kotak forecasted volatility in global interest rate markets due to rising bond yields
- Japan's 10-year bond yield surpassed 3%, while the US 10-year yield exceeded 4.8%
- Central banks may increase currency printing to manage deficits, risking higher inflation
Uday Kotak, the founder and director of Kotak Mahindra Bank, projected a "roller coaster ride" for global interest rate markets, in an 'X' post on Wednesday.
He noted that Japan's 10-year bond yield crossed 3% while the US's went past 4.8%, indicating that both governments' debts were rising. He stated that both countries' central banks may have to resort to printing more currency in order to keep up with rising deficits, leading to a subsequent increase in inflation in the economies as demand overtakes supply.
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"If so, inflation goes up, short end rates go up. Be ready for a roller coaster ride in interest rate markets!" Kotak said.
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Global bond yields have continued to climb, raising concerns from that persistent inflation could limit the US Federal Reserve's ability to ease monetary policy later this month. The yield on the US 10-year Treasury note climbed to levels not seen since January 2025. Japan's 10-year government bond yield also reached its highest level since August 1996.
Until 2024, Japan's central bank, 'The Bank of Japan' (BOJ), has kept interest rates below zero in order to facilitate more borrowing and make investment cheaper. The BOJ has started ramping up its lending rates in order to incentivise Japanese investors to keep their capital within Japan. While it makes borrowing costlier for the Japanese authorities, firms and households, domestic bonds can now offer higher yields on purchase.
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