Foreigners step up India bond purchases before anticipated interest rate cut
MUMBAI, Feb 5 (Reuters) - Indian government bonds are seeing increased buying interest from foreign investors ahead of an anticipated interest rate cut from the Reserve Bank of India this week.
Foreigners have net bought 182 billion rupees ($2.09 billion) worth of debt in the past seven days, surpassing the aggregate purchases from these investors in the previous 19 weeks, clearing house data showed.
"I would expect the central bank to start with a token rate cut of 25 basis points this week," said Ashhish Vaidya, managing director and treasurer of global financial markets at DBS Bank India.
Portfolio managers that are underweight on Indian bonds have started rebalancing their portfolios, as they might not want to miss out on the rally and underperform the global bond indexes, Vaidya said.
Overall foreign purchases of Indian bonds with no investment limit have surpassed the $20 billion mark since JPMorgan announced the inclusion of Indian debt in September 2023.
The RBI's monetary policy decision is due on Friday and markets widely expect a 25-basis-point rate cut.
Expectations were further bolstered by the central bank's announcement of a mega liquidity infusion package and its bond purchase in the secondary market.
The 10-year benchmark bond yield has eased 20 basis points from its highs hit three weeks ago, while overnight index swap rates have dipped by over 30 basis points in the same period.
Investors point to the risk of reversal of these flows, especially from shorter-term bonds, if the central bank does not deliver a rate cut.
"RBI's inaction could lead to disappointment and a sell-off in bond markets, pushing bond yields higher. The lack of a rate cut could increase volatility in bonds as investors reassess their positions," said Manish Bhargava, CEO at Straits Investment Management.
"Without a cut, 2-year and 5-year bond yields could rise as markets push out rate cut expectations."
($1 = 87.1520 Indian rupees)
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Reuters
22 minutes ago
- Reuters
Denmark picks French, German and Norwegian air defence suppliers
COPENHAGEN, June 10 (Reuters) - Denmark will acquire short-range air defence systems from MBDA France, Germany's Diehl Defence and Kongsberg Gruppen ( opens new tab of Norway, the Nordic country's defence ministry said in a statement on Tuesday. Danish Prime Minister Mette Frederiksen in February ordered the military to go on a buying spree to beef up the country's defences in preparation for potential future Russian aggression in Europe. Denmark will spend over six billion Danish crowns ($919 million) on the artillery acquisition, with the first deliveries expected in 2026, the defence ministry said. Denmark received 10 offers, including from suppliers in Turkey, Israel and Italy, and decided in the end to buy systems from French and German suppliers and to lease one from Norway's Kongsberg, it added. ($1 = 6.5304 Danish crowns)
Reuters
23 minutes ago
- Reuters
China is only 3-6 months behind US in AI, Trump official says
WASHINGTON, June 10 (Reuters) - China is three to six months behind the United States in artificial intelligence, White house AI and crypto czar David Sacks said Tuesday at an event in Washington, warning that excess U.S. AI regulation could damage American innovation in the industry. "China is not years and years behind us in AI. Maybe they're 3-6 months,' said Sacks, speaking at the AWS summit in Washington. "It's a very close race."
Reuters
27 minutes ago
- Reuters
US energy loan office should fund oil, gas, White House aide says
WASHINGTON, June 10 (Reuters) - The U.S. Energy Department's loan office should fund oil and gas infrastructure, a White House aide said on Tuesday. "One of the big problems is, in the past the ... loan program office has been used for a lot of these renewable projects," Jarrod Agen, a deputy assistant to the president and executive director of the National Energy Dominance Council, said at a Politico conference on energy. The Loan Programs Office grew rapidly under former President Joe Biden, thanks to legislation passed during his term, and has hundreds of billions of dollars in loan and loan guarantee capacity. Agen said the administration is changing the priority of the LPO, which is meant to help finance emerging energy projects that show promise but face difficulties getting bank loans. "So, yes, we want to invest more and prioritize projects that are oil and gas-related, nuclear-related," Agen said. President Donald Trump's new energy dominance council has focused on increasing already record-high oil and gas output and cutting climate and pollution regulations on fossil fuels. In his first term, Trump only used the LPO to finance the Vogtle nuclear plant in Georgia. The Trump administration wants to offer tens of billions of dollars in LPO financing over the next two years to projects developing nuclear and geothermal power and minerals used in everything from wind and solar power to weapons systems, according to the White House budget for fiscal 2026. Republicans in the House have pushed to slash LPO's lending.
