(Bloomberg) -- Foreign investors snapped up longer-tenor Indian bonds in the past month, a sign they may be keen to lock in yields before potential interest-rate cuts from the central bank.
Maturities of 10 years or more accounted for 23.5% of overseas investors’ holdings of fully-accessible route — or FAR — bonds on Wednesday, calculations by Bloomberg based on Clearing Corporation of India data showed. That’s up 1.7 percentage points from the previous month, when they joined JPMorgan Chase & Co.’s flagship emerging-market fixed-income gauge.
The change came as economists bet India’s central bank may be nearing a pivot to rate cuts, with growing calls for them from within the Reserve Bank of India’s monetary policy committee. Some measures of Indian inflation have eased — a gauge excluding food and energy decelerated in June, for instance.
“Overall your inflation backdrop is looking positive for bond investors,” said Jerome Tay, fixed-income fund manager at abrdn Plc, who said he favors longer-tenor debt. “A rate cut is the other catalyst for duration.”
The results are in keeping with a trend toward longer-dated notes since JPMorgan announced India would be included in its key fixed-income index. The country’s bond market had been tightly regulated, with one of the lowest ratios of foreign participation of any emerging economy, and has now opened up to billions of dollars of fresh investment.
FAR bonds are the only government securities freely available to non-resident investors and are the bonds included in JPMorgan’s index.
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