MUMBAI: Indian government bond yields fell in the early session on Tuesday, following a proposal to include eligible domestic bonds in the Bloomberg Emerging Market Local Currency index, which will bring foreign inflows in India.
India’s 10-year benchmark bond yield was at 7.1866% as of 10:00 a.m. IST, against its previous close at 7.2016%.
Bloomberg Index Services’ proposal on Monday came a few months after JPMorgan said it would include India in its widely tracked emerging market debt index in June.
“These inclusions stand to improve the demand-supply dynamics for the sovereign bonds by tapping a significant under-realised investor group,” Radhika Rao, economist at DBS Bank said.
It will also help balance fiscal discipline with the need to boost infrastructure capabilities and support the overall balance of payments math, Rao added.
There was a jump in foreign investment in Indian bonds in 2023 as JPMorgan’s decision to add the debt to its indexes boosted inflows to a six-year high.
India bond yields may rise tracking US peers
“There’s some optimism but a sharp fall is unlikely to sustain as inclusion in Bloomberg EM index will not bring significant inflows as the overall assets under management size is small,” a primary dealer said.
Local bonds will continue to track US peers as traders await US inflation data due later in the week for clarity on rate cuts by the Federal Reserve.
US yields fell on Monday after the New York Fed’s latest Survey of Consumer Expectations showed that inflation projection fell to the lowest in nearly three years, supporting expectations of rate cuts.
Market participants also took comfort from easing oil prices.
They fell over 3% on Monday on sharp price cuts by Saudi Arabia and a rise in OPEC output.
Later in the day, nine states will aim to raise 193.30 billion rupees via bonds, sharply lower than the scheduled 291.9 billion rupees.
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