US Treasury yields reach 5.25% or higher in 2027 as heavy government borrowing and funding needs of large technology companies put pressure on the long end of the bond market, according to Steven Englander, Managing Director and Global Head of G10 FX Research and North American Macro Strategy at Standard Chartered Bank.
He does not see a US Federal Reserve rate hike in his baseline forecast.
Englander remains a medium-term dollar bull, although he expects the currency to face a rough period over the next month. For the rupee, he sees no major move in either direction, with the currency likely to remain in a trading range as global capital flows, oil prices and domestic factors continue to influence its trajectory.
This is an edited transcript of the interview.
Q: Let’s come to the US yields itself. With this very strong jobs data, is a rate hike either in September or sometime in 2026 now almost a given?
A: We don’t think so. We don’t think they’re going to hike in September. I think people are missing the ambiguity in the comments both that Warsh (Fed Chair Kevin Warsh) has made, but that others have made. They want to see inflation come down, but the timetable when they’ve been discussing it isn’t two weeks. It’s like a couple of months. They want to see the beginning of that trend emerging.
Influential Federal Open Market Committee (FOMC) members such as Waller (Christopher J. Waller) and Williams (John Williams), and they vote, have come out and sort of said, “Hey, there’s no rush.” So, I think that 16 or 17 basis points that’s now priced in is too much.
Q: We have one inflation data point before the US FOMC meet. You’re saying that even if that’s not to the market’s liking, it’s not a given? Or do you think if that data is, say, 30 basis points higher instead of 20 basis points, which the market is expecting, that can be a decider?
A: We’re all adults here, and we know that month-on-month inflation data is meaningless. And I really think, from their comments, that they’d like to see what happens by December.
If there’s no sign that inflation’s coming down by December, I think there is a risk that they will hike. We think the inflation picture isn’t that bad, so we don’t think they’re going to hike. But conditionally, if we’re wrong on the inflation side, I would put December and beyond into the picture.
Q: I’ll come back to the US yields and US dollar as well, but more interested in the rupee and the opinion of people like you on the currency. The rupee went through a rough patch in calendar year 2025 (CY25) and half of CY26, but now we have this $136 billion of flows in all of just six weeks. What’s the global impression now of the dollar-rupee?
A: Long-term, we don’t think the rupee is out of the woods, but short-term, I think the market was impressed by the flow.
If you think of it in terms of intervention, that’s real money we’re talking about; it’s not small interventions hoping as a signal. That’s a big flow. I think that the market will wait and see what happens next.
The tool that the Reserve Bank of India (RBI) used is not a tool that they can use every day. And I think down the road, the same issues—if oil prices stay high, if capital inflows from other sources are weak—we could see renewed pressure, but perhaps not immediately.
Q: The Indian growth story is still good. We just got the first-quarter, that is April, May, June, gross domestic product (GDP) number, which is quite strong at 7.8%. Also, the corporate results for those three months, April-June quarter of 2026 (Q1FY27), were better than maybe the best in eight quarters. Very good growth, auto sales growth. There are several numbers which are good. Doesn’t that turn the tide, do you think?
A: The rupee may be an innocent victim of what’s happening elsewhere, not just US yields running up, but what I’m seeing among clients is a very big interest in what used to be called frontier markets.
And compared to these markets, the rupee is a well-established, quiet, Indian rates, everyday sort of thing. And what’s happened is that these higher yielders, investors have noticed that many of them are uncorrelated with other FX prices. They carry high yields, and they say, “Wait a second, these aren’t as risky as we thought they were.”
And so, I think that India’s yields are respectable, but compared to what you can get from these markets if you’re comfortable with them, I think a lot of money is going there right now, and the 6-7% on the rupee—
Watch the full conversation here
Q: Which are these frontier buckets?
A: Paraguay, some of the African markets, places that historically have been considered very far out the risk-return curve are now considered like respectable places to put your money.
More to come…
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