Bond St lights up with FPI money, more to flow in after Fed rate cut
Indian government bonds has accelerated through August as decision-influencing US data and Federal Reserve commentary point toward a rate cut later this month, but are not alarming by themselves to trigger a risk-off sentiment on Wall Street and dent financial assets in the world's fastest-expanding major economy.
From July 31 to August 30, the indicative value of foreign portfolio investors' aggregate holdings in fully accessible route (FAR) government bonds increased by ₹23,914 crore, or around $2.85 billion, to ₹2.29 lakh crore, an analysis of official clearing house data showed. The inflow topped the broad market expectations of around $2 billion of average monthly inflows following the inclusion of local debt in a JP Morgan index.
«The moment the US rates start to come off, it will give a fresh lease of life to emerging market debt and the JP Morgan inclusion has tilted the whole thing in favour of India,» said Ashhish Vaidya, head of treasury and markets at DBS Bank. «While the JP Morgan inflow has to keep coming in, it's gaining pace because the global portfolio managers are now actively trying to get into the index.»
Compared with July, August netted $500 million more, the data showed. The odds are now lower that overseas flows into Indian bonds will surprise on the upside as a much-desired 'soft landing' in the US seems to be materialising, sustaining the risk appetite for emerging market assets.
«We've already seen a dip in yields in the US, so it makes sense to diversify. This is just the start for
