Foreign flows into G-secs cross $9 billion in 7 months, top 2023 tally
Foreign investment in Indian government securities via the fully accessible route (FAR) crossed $9 billion in the first seven months of this calendar year, significantly exceeding investments for the whole of 2023 during which $8.21 billion came in into those securities, an analysis of CCIL data showed.
Since the announcement of inclusion of domestic sovereign debt in the JP Morgan index in September 2023, there has been a $13.26 billion gush in government securities through FAR.
Given the global sentiments this year, with the US rate cut cycle expected to start next month and the US 10 year bond yields going below 4%, emerging market debts have become more lucrative for foreign investors.
«Global sentiments are positive as markets have priced in for a rate cut in the US, which has also caused US bonds yields to come down, increasing the appeal of emerging market debts», said Abhishek Upadhyay, Senior Economist of Fixed income strategy, ICICI Securities Primary Dealership.
A sizable chunk of the foreign flow that has come into domestic debt has also been on account of foreigners without Indian registrations using proxy instruments like Total Return Swaps.
The Reserve Bank of India (RBI) said earlier this week that it would exclude all new government securities of 14-year and 30-year tenors from the FAR suite of bonds, which does not have any restrictions on foreign investment.
This move is expected to bring down the average maturity of local bonds in the index. As of now, the average maturity of Indian bonds
