Global Bond Doubts Not Stopping Foreigners Buying India Debt
(Bloomberg) -- The confusion over India's first offshore government bond sale proved no barrier to the yield-hungry foreigners snapping up local debt.
Global funds bought a net 20.3 billion rupees ($290 million) of sovereign notes in the first three days of the week, signaling the debt's appeal overpowered doubts about the issuance after last week's departure of a top finance ministry official and reports of opposition from the prime minister's office.
Foreigners have been net buyers of Indian bonds for a third straight month in July as the world's growing stock of negative-yielding debt and bets that the central bank will cut rates further fuels Asia's best bond rally this year. The 10-year yield has slid 51 basis points last month to reach 6.37% on Wednesday, a rate that still offers plenty of premium to developed markets.
“The reason foreigners are investing in India is because of attractive yields and the promise of capital appreciation on the back of more rate cuts,” said Harish Agarwal, a Mumbai-based trader at FirstRand Bank. “I don't think foreign-bond issuance would be a game-changer.”
Finance Minister Nirmala Sitharaman was quoted by the Economic Times on Monday saying that she isn't rethinking the offshore plan, which has faced criticism from the start. But it was her calls in the same interview for further monetary easing to spur economic growth that has helped yields recoup last week's jump of 16 basis points.
The central bank's rate-setting panel is scheduled to decide rates on Aug. 7. It has delivered 75 basis points of cuts since February.
India is among few countries with an investment grade rating to offer yields of more than 5%, said Manu George, director of fixed income at Schroder Investment Management Ltd. in Singapore. “Indian bonds offer good value in a low-yielding world and have the potential to rally further.”
To contact the reporter on this story: Kartik Goyal in Mumbai at kgoyal@bloomberg.net
To contact the editors responsible for this story: Tan Hwee Ann at hatan@bloomberg.net, Ravil Shirodkar, Robert Brand
©2019 Bloomberg L.P.
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