Opinion
Mint Quick Edit | Can India’s sovereign bonds attract more foreign inflows?
Summary
- It’ll be good if Sebi eases the path for foreign investors looking to invest in government securities. Especially since rising US Treasury yields after Trump’s win and a strengthening dollar are reducing the relative appeal of Indian paper.
Reports suggest that the Securities and Exchange Board of India will soon ease the way for foreign portfolio investors (FPIs) that intend to invest only in government securities.
While these bonds saw inflows of about $14.5 billion via the “fully accessible route" in 2024, aided partly by their inclusion in the JP Morgan Emerging Market Index, more FPI money would have come in had US sovereign bond yields not surged after Donald Trump’s election win.
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Last week, the 10-year US Treasury bond’s yield touched 4.7%, up half a percentage point since then. This reflects bond market expectations of inflationary policies under Trump.
It also means a smaller yield gap with Indian bonds of the same tenure, whose yield has dipped below 6.8%, making US bonds relatively more attractive.
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The dollar’s growing strength adds to that effect. All this means we must work harder to attract foreign funds in government debt. Strong demand for our bonds helps lower the interest rate at which the Centre borrows.
Since India’s external obligations are low, larger inflows won’t really raise stability risks. More of our bonds could be made globally accessible.
Also read: Sebi's liquidity window: A tailored fix for India’s corporate bond market woes
