India Global Bond Holdings Fall Most in a Month as Rally Stalls

  • Investors taking advantage of recent rally to sell: Edelweiss
  • Rupee falls as IMF warns of growing emerging-market risks

Foreign ownership of Indian bonds fell the most in a month as a rally that drove the 10-year sovereign yield to a two-year low loses steam.

Global holdings of rupee-denominated government and corporate notes declined by 4.5 billion rupees ($69.2 million) on Wednesday, the most since Sept. 9, according to data from the National Security Depository Ltd. The yield on the securities due May 2025 has rebounded after it slumped to 7.51 percent on Oct. 5, the lowest close for benchmark 10-year debt since July 2013.

Sovereign bonds climbed after the Reserve Bank of India surprised investors on Sept. 29 with a larger-than-estimated cut in interest rates while also unveiling a plan to allow foreigners greater access to the notes. The yield on the 2025 notes was steady at 7.54 percent in Mumbai on Thursday, prices from the RBI’s trading system show.

“There is perhaps some profit-booking by overseas funds that’s getting reflected in bonds after the recent rally,” said Ankur Jhaveri, co-head of currencies and rates at Edelweiss Financial Services Ltd. in Mumbai. “That doesn’t change our bullish outlook on government bonds given the recent market opening.”

The rupee weakened as the International Monetary Fund warned of growing emerging-market risks amid the possibility of an increase in U.S. interest rates. The currency retreated 0.2 percent to 65.0850 a dollar, according to prices from local banks compiled by Bloomberg. It jumped 1.4 percent in September in Asia’s best performance.

“Emerging markets face substantial challenges in adjusting to the new global market realities from a position of higher vulnerability,” according to the IMF’s Global Financial Stability Report, which described the preconditions for a Federal Reserve rate rise as “nearly in place.”

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