New Delhi, Aug. 31 -- The finance ministry on Monday said it's closely tracking the rise in sovereign bond yields worldwide and the movement of investment capital, as developed economies seek to fund their fiscal spending and refinance debt.

"The rise in (global) yield can cut both ways. Our bond yields can rise in tandem. Or, if they don't, the spread compression can put pressure on the domestic currency," the ministry said in its economic review for August.

Elevated US Treasury yields can potentially reduce the appeal of Indian securities to foreign investors unless domestic yields rise in tandem. The yield on the 30-year US treasury bond hit a 19-year high of 5.33% earlier this month.

Foreign capital inflows are key to maintaining t...