In the end, all was well last week in the bond market.

The 10-year yield surged to 7.26% on Thursday after the market reopened to a stunning rise in inflation in July.

It was a truncated week, with holidays for the bond market on Tuesday and Wednesday.

Late on Monday, after the bond market had closed, the government said CPI inflation in July sped to 7.44%. It was way higher than what most analysts expected. The consensus view was that inflation would rise to 6.5%.

So, when the markets reopened Thursday, the 10-year yield surged to 7.26% before closing a shade below 7.25%.

In the run-up to this week, 7.25% was expected to be the resistance that could hold for the entire year.

Fortunately, buying emerged from long-term investors and the yields eased on Friday.

The market, however, remains concerned that central banks in India and the US will hold interest rates higher for longer.

Equities continued to correct, which several experts say is healthy in the present bull market.

Domestic Markets Last Week:

Stocks ended down for the fourth straight week led by banking and IT shares tracking a slide in global markets as concerns over US interest rates and China's flagging economic recovery dulled risk appetite. This is the longest weekly losing streak for the indices in over a year. The drop corresponded to a broader trend in the global stock market.

Yields rose again last week, for the fourth week in a row. The yields fell on Friday tracking the US peers and the strong demand seen at the weekly auction. When the markets reopened on Thursday after two days of midweek holidays, the 10-year yield quickly went up to 7.26% due to the surge in July inflation to 7.44%

Rupee ended lower against the dollar on a weekly basis but finished higher on Friday, helped by a decline in the yields on U.S. Treasuries and some relaxation in the value of the dollar globally. Earlier in the week, concerns that U.S. interest rates would remain higher for a longer period of time drove the local unit towards a record low.

Global Markets Last Week:

US stocks were nearly unchanged on Friday, as gains in defensive sectors and energy offset losses in megacap growth stocks, and investors awaited the speech of Federal Reserve Chair Jerome Powell this week. In the past three weeks, the Nasdaq has declined 7.2%, its largest three-week decline since late December. The three-week loss of 4.6% for the S&P 500 is its largest since the three weeks ending on March 10.

US Treasury gained some much-needed support on Friday as yields near decade-highs drew demand, but solid economic data is still fueling fears of higher-for-longer rates in the world's largest economy. This week's data showed a strong US economy despite the Federal Reserve's aggressive rate hikes, raising prospects of a "soft landing" and giving the central bank flexibility to avoid dropping rates too soon. Money markets expect the Fed to hold rates at its September policy meeting but are divided on whether it is done with tightening.

The US dollar has now won five straight weeks against major global currencies, the longest such streak in 15 months. This can be due to the strong US economy, which presents a solid case for keeping interest rates high. The US dollar initially climbed against the Yen during the trade week but reached a point of weariness by Friday. Short-term traders will decide where this market goes next.

Corporate Bonds

Secondary Market

Yields rose by 5-7 basis points across tenures last week after the CPI July inflation rose to a 15-month high of 7.44% and due to a rise in the US Treasury yield. Some public sector banks and pension funds were buying bonds last week, while private banks and mutual funds were mostly on the selling side.

Outlook For This Week

Investors will take cues from global stock markets, progress of monsoon, crude oil prices this week to decide on the direction of the market. Shares are likely to open mixed on Monday, while government bond yields will track slew of data points from the US such as July Home Sales, Redbook retail sales, July Durable goods and China’s decision on loan Prime Rate for 1-year and 5-year this week.

In Other News

• Apple, Google and others want US government to go against India's laptop, PC import curbs
• Moody’s affirms BAA3 rating on India, flags debt burden and curtailment of political dissent, populist policies
• JPMorgan index may include India bonds in 2024 as per one of Europe's biggest asset managers
• India closes in on moon landing as Russia also races to lunar south pole
• Global stock managers on guard as China pain set to spread
• ASCI revises guidelines for financial influencers
• Mumbai police issues order banning drones, gliders in city airspace till September 16
• India's Jio Financial Services to be listed on Aug. 21
• India's Concord Biotech ends 27% higher in debut at $1 bln valuation
• Byju's fires high-salaried staffers from mentoring, product divisions
• Evergrande files for US bankruptcy protection as China economic fears mount
• SoftBank buys Vision Fund's stake in Arm at valuation of $64 bln-sources
• Bitcoin drops to new two-month low as world markets sell off
• Government will ensure an orderly transition to new data rules: MoS IT