India bonds rangebound as Bloomberg index-entry hopes counter

MUMBAI: Indian government bonds drifted in a tight range on Wednesday, caught between rising expectations of inclusion into the Bloomberg Global Aggregate Index and reduced buying from a key investor category.

The yield on the benchmark 10-year note was at 6.5157% as of 10:30 a.m. IST.

It closed at 6.5258% on Tuesday.

Indian media outlet Business Standard reported on Tuesday that major foreign portfolio investors had given a favourable response to Bloomberg Index Services as it sought views on including India’s fully accessible route (FAR) government bonds in the Bloomberg Global Aggregate Index.

Traders said the news sparked buying on Tuesday, driving the 10-year yield lower after a three-day rise.

Still, the gains were capped as purchases by the “others” investor category, which includes the Reserve Bank of India, fell sharply, traders said.

Buying by the “others” group plummeted to about 2 billion rupees ($22.58 million) on Tuesday, compared with a daily average of 50 billion rupees in the week ended November 7 when the central bank resumed secondary market bond purchases after a gap of six months, CCIL data showed.

“If there is no further buying on the index-entry news, then “others” not coming in could result in some erosion of confidence in the market,” a trader at an asset management company said.

The focus is now on the minutes of the Federal Reserve’s October meeting, due after market hours on Wednesday, for cues on the US rate-easing trajectory.

Separately, the RBI will sell treasury bills worth 190 billion rupees later in the day.