Stars are aligning for Indian bonds to extend rally into 2025
The central bank’s rate cuts anticipated from early next year on slowing economic growth, continued index-inclusion-related foreign inflows and strong demand from local pension and insurance companies are likely to further burnish the appeal of sovereign notes.
Quantum Asset Management forecasts the yield on the benchmark 10-year bond to fall as much as 50 basis points by mid-2025, while Trust Mutual Fund sees the rate sliding toward 6.25%-6.5% over the next year and a half.
While a resurgent dollar and higher Treasury yields have dented the appeal of emerging-market assets in recent weeks on concerns about US President-elect Donald Trump’s policies, Indian bonds have remained largely insulated.
Even as “there are headwinds from a stronger dollar and higher US Treasury yields, the ongoing bond index inclusion flows are likely to provide sustained solid passive support to Indian bonds,” Barclays Plc strategists including Mitul Kotecha wrote in a note.
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