The rising US yields has been worrying bond as well as equities markets across the globe. Bruno Verstraete of Lakefield Partners believes that rising yields will not be beneficial for emerging market bonds.

“Emerging markets are very closely linked to what happens in US. So rising yields will not be beneficial for emerging market bonds. Yields will go up, there will be profit taking on the bonds; that is clearly a very close connection,” he said in an interview to CNBC-TV18.

According to Verstraete, the US Fed needs to keep yields down as long as they can for the economy to normalize. He said that the Fed is aware of the consequences and hence will not taper very quickly.

“The US Fed needs to push the yields down as long as they can and especially keep it down under the zero level on the real yield because we still have a period to breach in order to have the economy come back to normalization and then the economy is going to take over."

"We will have higher yields, higher interest rates will potentially come. I don’t think tapering will be used as a word very quickly. They know what the consequence could be and they are going to be using it very cautiously going forward knowing that this could impact the markets and as such also the economy,” he said.

However, he added that there was no need to panic yet. “I believe we shouldn’t panic yet. We are at a level now on the 10-year of February 2020 and that is still historic lows. So, hurting the economy, especially in real terms, is not going to happen anytime soon,” he said.

He also said that hiding in bonds in an environment where yields are going up is not the best thing to do and could push equities higher in the short run.

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(Edited by : Bivekananda Biswas)