If the spike in crude oil prices was not enough, another headwind has now cropped up for domestic stocks and bonds in the form of rising US treasury yields which have hit nearly 16-year highs following hawkish comments by Fed chair Jerome Powell.

Yields on the benchmark 10-year US treasury on Friday briefly crossed the 5 per cent mark with reports saying that it touched 5.001 per cent. The last time it had crossed the 5 per cent level was in July 20, 2007. It, however, retreated from these levels and was trading at 4.94 per cent at the time of writing this report. On Thursday, it had closed at 4.988 per cent.

While rising yields are bad news for the stock markets and domestic bonds, key Asian and European indices reacted negatively by falling up to 1.26 per cent while the Dow Jones Industrial Average and Nasdaq were also trading weak. However, domestic bond yields were largely steady with yields on the benchmark 10-year security trading at around 7.37 per cent.

The fresh worries came after comments by Powell which suggested that interest rates will stay in the elevated zone longer as he reiterated the inflation fight.

“Inflation is still too high, and a few months of good data are only the beginning of what it will take to build confidence that inflation is moving down sustainably toward our goal. We cannot yet know how long these lower readings will persist, or where inflation will settle over coming quarters. While the path is likely to be bumpy and take some time, my colleagues and I are united in our commitment to bringing inflation down sustainably to 2 per cent,” he said.