We consider these developments as supportive of increased capital flows into emerging markets and for the general strengthening of intermediation in international capital markets. Though there was a temporary upward shift in the long-term yields of bonds in the US, potential for significant risks of further increase in bond yields appear remote.
First, the policy interest rates have declined to historically low levels and upward hikes in quick succession are therefore unlikely. The housing and mortgage markets as also bond markets cannot withstand such sudden shocks. Second, the probability of inflation undershooting and the consequent adverse implications for deflationary expectations are feared by many.