US Treasury yield

The yield on debt issued by the US government: bills up to a year, notes from two to ten years and bonds out to thirty. The ten-year yield is the most watched interest rate in the world and the usual risk-free rate for dollar valuations.

It matters in India through two routes. Dollar investors compare it with what Indian assets offer after expected currency movement, so a higher Treasury yield narrows the gap: a ten-year Treasury at 4.2% against a ten-year Indian government bond at 6.5% leaves 230 basis points, before the rupee's expected depreciation, to pay for the extra risk. And it sets the dollar cost of capital for every Indian company borrowing abroad.

A valuation in dollars uses the Treasury yield as its risk-free rate; one in rupees uses the Indian government bond. Mixing them builds a currency bet into the discount rate.

Match the risk-free rate to the currency of the cash flows.