FPIs trim government bond holdings on rising global rate concerns
bond investors have been cutting down exposure to some of their most widely held long-term Indian government bonds amid a deepening rout in international fixed-income markets and the strengthening belief that interest rates would remain higher for longer.
In the fully accessible route (FAR) for government securities, the aggregate holding of foreign investors in their most favoured long-term bond has fallen by ₹1,192.6 crore over the past couple of months even as investment in other securities has remained broadly steady.
As on August 18, the aggregate holding of foreign portfolio investors (FPIs) in the 7.26%, 2032 government bond — an erstwhile 10-year benchmark security — accounts for 5.37% of the bond's outstanding stock of ₹1.48 lakh crore, down from 6.17% on June 19, Clearing Corporation of India data showed.
The 7.26%, 2032 bond is one of the three most widely held bonds by FPIs in the FAR category, which does not have any limits on foreign investment. Longer-term securities pose a greater degree of risk on bond portfolios.
Overall foreign portfolio investment in the general category for central government securities has also dwindled, having fallen by ₹5,790 crore so far in 2023.
«On the FPI investments in fixed-income, given where the US interest rates are, any other fixed-income market is not looking that attractive right now.
Within the emerging markets, given the overall macro-economic profile of India, it will attract some bit of interest going ahead,» said Ashhish Vaidya, managing director, DBS Bank India. «Given where we are right now, with a dollar yield of, say, 5% or 5.5% at the shorter end, the interest would be lower for an emerging market exposure and that's exactly what you've seen over the last one
. Read more on economictimes.indiatimes.com
