US bond yield is global finance’s Achilles heel: Uday Kotak after Fed meeting

Billionaire banker Uday Kotak termed the US bond yield the “Achilles heel” of global finance in a post on X, after the 30-year US Treasury yield crossed 5.20% on Thursday following the Federal Reserve’s interest rate decision.

The yield on the 30-year US Treasury bond rose to a 19-year high, according to a Reuters report, as concerns over the Federal Reserve’s commitment to curbing inflation prompted investors to seek greater protection against inflation risks. The 10-year US Treasury yield also crossed 4.70%.

The surge in yields came despite the Fed keeping interest rates unchanged, Kotak Mahindra Bank founder and director Uday Kotak said. “The new Chair Kevin Warsh believes in a smaller Fed balance sheet. That shrinks liquidity. Players may take note of the new conductor of markets’ symphony,” Kotak said in a post on X.




A divided Federal Reserve left interest rates ⁠unchanged, keeping it steady in the 3.50%-3.75% range on ‌Wednesday while Federal Reserve chair Kevin Warsh reaffirmed the central bank's commitment to bringing inflation under control, leaving markets uncertain about its next policy move, according to Reuters.

It has been reported that during the Fed’s meeting on Wednesday, three policymakers from the Federal Open Market Committee were in favour of raising interest rates rather than maintaining the current policy stance. The level of disagreement was notable, as per a report by Reuters, as no Fed chair since the 1970s has encountered such significant opposition so early in their tenure, based on records of FOMC dissents maintained by the Federal Reserve Bank of St. Louis.

The divisions under Warsh in his second meeting as Fed chair suggest that debates over the future path of interest rates could remain intense, as the Fed balances inflation risks, economic growth concerns and differing views among policymakers.