(Bloomberg) -- India kicked off a second batch of sovereign green bond sales in a test of demand for the securities in an environment of higher global yields. 

The Reserve Bank of India’s auction of 50 billion rupees ($600 million) of five-year notes Friday got a two basis point greenium — a lower borrowing cost due to its environmentally beneficial characteristics. The debut sale in January raised 80 billion rupees, garnering a greenium of six basis points below the benchmark yield. 

The smaller yield premium this time tallies with a wider trend of lower greeniums for global issuance this year. Greeniums have been on the wane, “and stand at around 1-3 basis points,” said Gino Beteta Vejarano, green bond analyst at Robeco Institutional Asset Management in Rotterdam. 

The yield on 10-year bond has climbed over 30 basis points from this year’s low in May, helped by tighter monetary policies by the RBI and central banks globally. 

“Green, social and sustainability bonds are at the end of the day, bonds — whatever happens to macro markets will affect them,” said Xuan Sheng Ou Yong, ESG analyst at BNP Paribas Asset Management in Singapore. 

Foreign investors are returning to India’s bond market with nearly $5 billion of inflows in 2023, after three years of net outflows. Many are being drawn in by JPMorgan Chase & Co.’s decision in September to add India to its widely tracked emerging markets bond index. That may widen the pool of demand for India’s rupee-denominated green bonds as well, said Sheng.

(Updates with comment in third paragraph)

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