To beat red tape, FPIs keen to buy India debt tap supranational bonds
investors, whose enthusiasm for purchasing Indian sovereign debt is sapped by the procedures associated with the exercise, have found a novel instrument to tap into the credit market in the world's fastest-expanding major economy: Supranational bonds.
Issuers of these instruments include entities such as the European Bank for Reconstruction and Development, International Finance Corp, and the Inter-American Development Bank. Investors include major global players such as Capital Group Cos, Bank of New York Mellon Corp, Mizuho Financial Group and Union Investment Luxembourg, among others, Bloomberg data showed.
The issuance of India-focused bonds in this category that government-owned, or supranational, entities use to raise funds totalled $5.5 billion in 2023, according to Bloomberg data. Volumes have more than doubled over the past year, market veterans said.
«Increase in these overseas issuances is driven by offshore investors seeking INR fixed income and foreign exchange exposure as a proxy to buying G-secs (government securities) via the FPI (foreign portfolio investment) route, without having to contend with local operational and taxation related aspects,» said Siddharth Bachhawat, head-markets at Barclays India.
Data provided to ET by UAE-based financial market data vendor Cbonds showed the increase in the outstanding amount of supranational bonds during the end of placement was $2.96 billion so far in 2023, compared with last year.
