Indian bonds continue to attract foreign investors

Foreign investors are returning to Indian bonds after a selloff in April, ahead of the debt’s inclusion into a key global index at the month-end, reports Bloomberg.

Net flows have climbed to $10 billion since September when JPMorgan Chase & Co announced the inclusion starting June 28.

The inflows are helping cool yields after Prime Minister Narendra Modi formed a coalition government following a surprisingly close election contest. The yield on 10-year government bonds has fallen eight basis points to 6.98 per cent from this month’s high.

Global funds bought a net 73.5 billion rupees ($881 million) of the nation’s index-eligible debt this month through June 18, following purchases of about 52 billion rupees in May. They sold 98.3 billion rupees of the so-called Fully Accessible Route bonds in April, according to data from the Clearing Corp. of India. The purchases are seen adding to tailwinds such as a robust dividend payment by the central bank to the government ahead of the annual budget.