India Bonds Set for Weekly Gain as Investment Cap Under Review

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Indian bonds headed for a weekly gain after central bank Governor Raghuram Rajan said regulators will soon review foreign investment limits for government debt.

Overseas institutional investors have almost exhausted the $30 billion cap imposed in 2013. Above-average monsoon rainfall and a retreat in oil prices have helped ease concern about inflation and boosted demand for bonds, according to PNB Gilts Ltd. in New Delhi.

“The markets are drawing comfort from the fact that raising the FII limit is now just a matter of time,” said Vijay Sharma, executive vice president for fixed income at PNB Gilts. “Lower oil prices, easing worries over a deficient monsoon and Greece are feeding into each other.”

The yield on the May 2025 notes fell three basis points for the week and two basis points Friday to 7.79 percent as of 9:45 a.m. in Mumbai, prices from the central bank’s trading system show.

Seasonal showers have been 10 percent above average since June 1, according to the weather bureau, which forecasts the June-September monsoon rainfall to be 88 percent of a 50-year average.

The government plans to sell 150 billion rupees ($2.4 billion) of notes Friday, including 60 billion rupees of 10-year debt, according to an RBI statement.

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