S&P 500 — US Large Cap Index
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CAC 40 — French Market Index
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BNY’s Geoff Yu highlights that INR faces strong selling pressure from a rebalancing perspective, as Indian bonds have outperformed major peers. With INR flows broadly flat, FX exposure has risen and investors are advised to keep hedging elevated after strong duration gains. Yu sees higher-beta currencies particularly exposed to July’s fixed-income moves.
Indian bonds outperformance lifts FX risk
“Selling pressure is strongest in INR. Like many emerging market (EM) bond markets, Indian duration benefited from lower oil prices during the first weeks of the ceasefire as real rates improved. The latest re-escalation has not erased those gains, and Indian bonds have outperformed the major markets we track.”
“With INR flows broadly flat over the month, FX exposure has risen and hedging demand has increased with it.”
“July’s duration gains are creating meaningful rebalancing needs, especially across higher-beta currencies. The real-rate outlook is more difficult, however, as central banks show growing reluctance to tighten further.”
“Global supply chains will take time to normalize, leaving non-U.S. real rates vulnerable if current market pricing persists. This strengthens the case for greater FX hedging across fixed-income portfolios.”
“Keep INR hedging elevated after strong
