Foreign inflows into Indian government bonds reach $2 billion since June 5, driving yields down as RBI policies attract portfolio investors.
Recent Reserve Bank of India measures to attract foreign portfolio investors have triggered a $2 billion inflow into government bonds since June 5, easing yields across the curve. The five-year segment led the rally, with yields sliding nearly 30 bps amid improved sentiment and accelerated buying by foreign banks.
Benchmark yields fell about 10 bps from Friday through Tuesday, reflecting a broader shift in RBI strategy. Indian banks are now offering 6%-7.1% on five-year USD deposits, echoing the 2013 swap window that drew $34 bn and signaling a preference for dollar inflows over rate hikes or FX intervention.
While inflation and FX reserves data are due tomorrow, their market impact may be muted as the RBI’s policy measures take effect.