Narendra Modi's Washington test

Narendra Modi's Washington test

If Modi gets the world’s biggest power right, his pursuit of larger global goals...
Small banks or banks for ‘small’ people?

Small banks or banks for ‘small’ people?

Unless appropriate sub-limits are imposed on loans, there is a serious...

Foreign investors bond with India, close in on $5.5-billion T-bill quota

Feb 19 2014, 15:54 IST
Comments 0
At the weekly auction on Tuesday, the cut-off yield on the 91-day Treasury bill was even higher at 9.11%. Reuters At the weekly auction on Tuesday, the cut-off yield on the 91-day Treasury bill was even higher at 9.11%. Reuters
SummaryAt the weekly auction on Tuesday, the cut-off yield on the 91-day Treasury bill was even higher at 9.11%.

Indian bonds are once again a favourite with foreign institutional investors (FIIs). The first 11 sessions of February have seen FIIs buy $1.6 billion worth of bonds, a strong run rate, data from the Securities and Exchange Board of India (Sebi) show. The purchases come on the back of a net $2 billion in January.

FIIs are, however, betting almost exclusively at the short end of the curve, snapping up high-yielding treasury bills; as on February 17, FIIs had exhausted 99% of the $5.5-billion investment limit in T-bills.

“Much of the money into the bond market appears to be coming into the short-term bonds and treasury bills,” Ananth Narayan G, head, global markets, Standard Chartered Bank, told FE.

The yield on treasury bills has been ruling at around 9% since January, while the yield on the most liquid benchmark 10-year 8.83%, 2023 government bond has been around 8.75% levels.

At the weekly auction on Tuesday, the cut-off yield on the 91-day Treasury bill was even higher at 9.11%. Equally important, the one-month offshore non-deliverable forward (NDF) dollar/rupee premium has dropped to levels of 20-30 paise over the last 45 days. “It’s a low-risk arbitrage trade and, therefore, it may continue as long as offshore hedging is conducive,” said Hitendra Dave, head, global markets, HSBC.

In the government bonds category, 76% of the $14.5-billion investment has been exhausted while in corporate bonds, FIIs hold a mere $14 billion out of the total available $51-billion limit.

The Reserve Bank of India (RBI) has been making efforts to encourage more long-term money into the bond market. In January, the central bank had increased the investment limit for long-term foreign investors in government bonds by $5 billion to $10 billion, effectively reduced the limit available for short-term investments by the same margin. Last week, the RBI reduced the sub-limit of FII investment into short-term commercial paper by $1.5 billion.

Ads by Google
Reader´s Comments
| Post a Comment
Please Wait while comments are loading...