Indian newspaper Business Standard reported on Tuesday that major foreign investors responded positively to Bloomberg Index Services’ advice on adding India’s fully accessible route (FAR) government bonds to its flagship Bloomberg Global Aggregate Index.
“The likely inclusion of FAR bonds in the Bloomberg Global Aggregate Index (AUM $2.5 trillion) could attract $25-30 billion inflows into long-term bonds, making the long-bond segment attractive,” Axis Asset Management strategists said in a note.
The news boosted buying on Tuesday, pushing yields down 2-3 basis points across the curve, but the rally was short-lived as a sharp decline in buying by a key asset class offset optimism.
Purchases by the “others” group, which includes the Reserve Bank of India, plunged to about 2 billion rupees ($22.58 million) on Tuesday, compared with the daily average of 50 billion rupees in the week ended Nov. 7, CCIL data showed. Traders are now closely watching for central bank action to pump liquidity and also provide signals on the RBI’s rate easing path before making strong directional calls. RBI is conducting open market operations (OMOs),” Axis AMC strategists said. Attention is also turning to the minutes of the Federal Reserve’s October meeting, expected after market hours on Wednesday, for clues on the US rate easing path.PRICES
India’s overnight index swap rate fell on Wednesday, supported by a stronger rupee that boosted foreign demand for government bonds.
The one-year OIS fell almost 1 basis point to 5.45%, the two-year rate fell slowly to 5.45% and the liquid five-year rate fell about 1.25 basis points to 5.73%.
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