Tag: India bonds

Indian bonds see biggest selloff in a year by global investors

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Indian rupee’s decline to a record low on Friday pushed foreign investors to reassess their frenzied buying of the country’s assets, triggering the biggest selloff in Indian bonds in a year.

Global funds sold a net $425.3 million of rupee-denominated bonds Friday, according to government depositories’ latest data. Selling was concentrated in index-eligible government bonds, with foreign holdings dropping by 38.81 billion rupees ($466 million) on the day, data from the Clearing Corp. of India show.

The selloff came on the day when the rupee fell by the most in six months. Investors’ quick portfolio realignment underscores how they manage currency risk amid a robust appetite for the fast-growing economy’s assets.

Overseas investors may have snapped up Indian assets with little thought to hedging currency risk, given the Reserve Bank of India’s efforts to keep the rupee within a tight trading band. The currency’s low volatility could have left investors with exposed unhedged positions, according to Philip McNicholas, Asia sovereign strategist at Robeco Group in Singapore.

“Offshore investors may have wanted to limit potential losses on what is still an off benchmark position,” he said. “Much the same way you see equity selloffs on such days.”

Foreign funds have flocked to Indian debt ahead of their inclusion in the JPMorgan Chase & Co’s global bond indexes in June, resulting in nearly $10 billion of inflows into the so-called Fully Accessible Route bonds. The stable rupee — among the least volatile in emerging markets — has been part of the allure.

“We expect the RBI to smooth volatility,” Macquarie Capital strategists including Trang Thuy Le wrote in a note. “But with INR having outperformed recently and crowded positioning, it is possible that the RBI may allow some further upside to USDINR to 84-85 range, before engaging in heavily.”

The rupee fell 0.1% Wednesday to 83.3275.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

This stock surged over 10% on India’s inclusion in Bloomberg EM bond indices

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Shares of PNB Gilts Ltd. gained as much as 11.5% on Tuesday after witnessing a sharp spike towards the final few minutes of the trading session.

The stock rose after Bloomberg announced that it will include Indian Bonds in its Emerging Market Bond indices from January 31, 2025.

This is also the biggest single-day surge that the stock has seen since September last year. The stock had gained 20 percent on September 22 when JPMorgan announced that India’s government bonds will be included as part of their Emerging Market Bonds index.

PNB Gilts trades in government dated securities, treasury bills, bonds of sector enterprises, government guaranteed bonds and state government securities.

The company’s board last year also approved a proposal to foray into the foreign exchange business.

In July 2023, PNB Gilts received the license from the Reserve Bank of India’s to act as an ‘Authorised Dealer – Category-III’, which allows an entity to undertake foreign exchange business.

PNB Gilts is one among the 21 primary dealers licensed by the Reserve Bank of India. In an interaction with CNBC-TV18 on September 22, Vikas Goel of PNB Gilts said that they have a balance sheet of ₹2,000 crore of government securities.

Shares of PNB Gilts are trading 9% higher at ₹119.05.

Also Read: Bloomberg to add India to EM bond indices from Jan 31, 2025

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

India bonds may be included in Bloomberg EM index from September: Statement

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Bloomberg Index Services on Monday proposed including eligible Indian bonds in its emerging market local currency index from September, a move that could lead to billions of dollars of inflows into the country.

The proposal comes just a few months after JPMorgan said it would include India in its widely tracked emerging market debt index from June.

The Indian government began discussing the inclusion of its securities in global indexes as far back as 2013 but restrictions on foreign investment in domestic debt hampered the process.

In April 2020, the Reserve Bank of India introduced securities that were exempt from foreign investment restrictions under a “fully accessible route” (FAR).

“Under the proposal, inclusion of India FAR bonds in the Bloomberg EM Local Currency Indices is to be phased in over a five-month period starting in September 2024,” the index provider said in a statement

Gaura Sengupta, India economist at IDFC First Bank, said India’s inclusion in the index would result in inflows of $2 billion to $3 billion over a five-month period.

India will continue to be excluded from the Bloomberg Global Aggregate and related indices, the statement said.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Bond investors risk getting burned if India fails to enter global indices

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Overseas investors are pouring into Indian bonds, putting the securities at risk of losses if a long-awaited inclusion into global indexes once again fails to take place.

Bond purchases by global funds under the so-called Fully Accessible Route jumped to 42 billion rupees ($529 million) in August, the most since January. They have already snapped up an additional 31 billion rupees of the securities in September.

The inflows have added fuel to a bond rally driven by optimism that JPMorgan Chase & Co. will announce the inclusion of Indian debt in its emerging-markets index as early as the middle of this month. Any disappointment may dampen sentiment and lead to a selloff, according to Quantum Asset Management Company.

Also read: India wants local settlement if its bonds join global index

India’s benchmark 10-year yields have dropped about 50 basis points from their June high of 7.62 percent, to close at 7.12 percent on Wednesday. In contrast, similar-maturity US Treasury yields jumped about 40 basis points since the end of that month.

Also read: Russia’s exclusion may pave way for India into global bond index

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

India, Philippines’ bonds most vulnerable to Omicron threat: Report

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Bonds in two Asian countries, India and the Philippines, are most vulnerable amid fears of further economic slowdowns due to the Omicron variant of COVID-19, a report said on Thursday.

Of the seven Asian countries, India and Philippines have the steepest bond yield curves. As a result, any additional fiscal stimulus by the government would come at a higher cost, Bloomberg reported.

It added that inflation would limit the scope of monetary easing by the government and lower vaccination rates would add to the stress on the two economies.

“In the event, Omicron turns out worse than the Delta strain, India and Philippines may see some deterioration of the fiscal and debt outlook due to weaker government revenues and the need for extended stimulus in 2022,” Duncan Tan, strategist at DBS Bank in Singapore, told Bloomberg.

His remark comes at a time when two Omicron cases have been reported. However, there is so far no known case of the new stain in Philippines.

Investors have been worried about the threat posed by the new variant, which was first detected in South Africa last month. The global market roiled under pressure as countries rushed to seal borders and impose travel bans to limit the spread of the new mutant. As health experts weigh the severity of Omicron, investors are treading cautiously and waiting for more information on the new variant.

The yield spread between two-year government bonds and 10-year bonds is the widest compared with the five-year average in India and Philippines. This is because India’s borrowing programme for the ongoing financial year is already nearing a record high. And, for Philippines, the budget deficit this year is already at an all-time high.

Meanwhile, the Reserve Bank of India ended its bond purchase programme in September, which may add to the pressure on Indian bonds. In the Philippines, on the other hand, rising yields have prompted the government to reject a few tenders at auctions in October.

Apart from the fiscal constraints in the two countries, higher inflation will also narrow the scope for monetary easing, according to the report.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

India may issue $5 billion of bonds with no foreign investment cap to attract foreign funds

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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India is likely to issue at least $5 billion worth of bonds with no limits on foreign investment next year, in a bid to list the bonds on global indices and attract more foreign funds, according to two finance ministry sources.

India’s government is likely to issue the bonds in several tranches of at least $400 million each, one source said.

“We have spoken to major index operators and we will start pushing these bonds in tranches very early in the first half of the next fiscal year itself,” the first official said.

The bonds would be rupee-denominated, said the officials, who asked not to be named as the discussions were still private.

The finance ministry did not immediately reply to an email seeking comment. India’s fiscal year starts on April 1 and runs through March.

In September, Reuters reported the government was considering a special window free of any foreign investment cap for overseas passive investors.

An inclusion in global indices would open India’s bond market to more investors and potentially reduce the government’s borrowing costs.

That investment could be significant in the long run, said Ananth Narayan, associate professor of finance at S.P. Jain Institute of Management and Research.

However, Narayan said, “if it is only a few bonds, a full-fledged index inclusion will not happen. We will get a very small, negligible kind of weightage on the index, but it is a good way to start.”

Generally, to include a sovereign bond global indices the issuing country needs to remove all foreign investment caps. But India has negotiated with some operators to open a new category of bonds that would have no caps instead of removing the 6 percent cap for the entire market, the first official said.

Finance minister Nirmala Sithraman announced plans to fully open a certain category of bonds for foreign investors during her budget speech on February 1 but did not give details such as quantity, timing or tenure.

The move would reduce the amount of securities that would need to be bought purely by domestic participants by about 4.5 percent at the outset. India’s total planned borrowing for 2020/21 stands at $109.57 billion.

The Indian government is looking for fresh investors as Prime Minister Narendra Modi plans to spend over 100 trillion rupees to build new roads, hospitals, airports and rural infrastructure.

Chinese renminbi-denominated government bonds were added to the Bloomberg Barclays Global Aggregate index in April and the country is predicted to get some $150 billion worth of foreign investment.

Several market participants said they expect around $10 billion to $20 billion of inflows if the bonds join a global index. The flows could be much larger if limits on foreign ownership of Indian bonds are completely removed.

Both the officials said that the government is in talks with market players to gauge the appetite for such bonds and may also increase the cap for foreign investment for the entire market if warranted in the future.

The government is currently working on the tenures of the bonds and could come up with 10-year benchmark bonds in the special category as well, said the first official.

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3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow