Government securities maturing in over five years have seen the highest investment from foreign investors since fully accessible route (FAR) bonds were included into the JPMorgan Chase & Co.’s emerging market index in June 28.
The 7.41% GS 2036 and the current 10-year benchmark, 7.10% GS 2034, have emerged as the top securities in attracting funds from overseas, witnessing Rs 2,134 crore and Rs 1,159 crore, respectively, from investors in the past two weeks, according to the Clearing Corporation of India data. “Foreign investors look for securities with higher trade volume. They prefer liquid papers such as 10-year benchmark 7.10% GS 2034, which is the most-traded bond currently,” V Ramachandra Reddy, head of treasury, Karur Vysya Bank, told FE. “These liquid papers will continue to attract global investors,” he added.
Foreign investors have poured over Rs 5,900 crore ($705 million) into FAR bonds since June 28. Investment by FPIs in government securities under the FAR has increased to Rs 1.91 trillion as on July 11, from Rs 1.83 trillion as of June 27.In terms of FPI ownership, former benchmark 7.18% 2033 bond is on top with overseas investors owning 12.16%, followed by 05.74% GS 2026 paper in which foreign investors own 10.64%.
FAR bonds have seen eight straight weeks of inflows, attracting more than $11 billion since the inclusion announcement in September. Nomura and Goldman Sachs Group are forecasting as much as $3 billion of monthly inflows over the next few months as India’s initial weight of 1% on the index reaches 10% by March. Bond yields have moderated slightly over the past couple months due to increased inflows. The 10-year yield traded in the range of 6.90%-7.03% in June, compared with 6.97%-7.14% in May. On Thursday, yields on the benchmark 10-year bond closed at 6.99%, from 7.009% on June 28.
JP Morgan Chase & Co announced in September last year that it would add Indian government bonds to its benchmark Global Bond Index Emerging Markets Index (GBI-EM) from June 28. Currently, India carries 1 % weight in the index, with planned incremental increases each month till March 2025. Securities included in global bond indices do not have any foreign investment limits.
