India to Extend Record Bond Inflows on Yields: Chart of the Day

This year’s record fund inflows into Indian bonds will be extended after the country’s yield advantage over developed nations reached a 2012 high, according to Sun Global Investments Ltd.

The CHART OF THE DAY shows the extra yield on local 10-year sovereign notes over similar-maturity U.S. Treasuries widened to 642 basis points on April 8, the most since Dec. 14, 2012, data compiled by Bloomberg show. Global investors boosted holdings of domestic debt by an unprecedented $6.2 billion in the three months ended March 31 as the rupee rallied 3.2 percent, the most in six quarters, amid intensified efforts by policy makers to rein in inflation and the current-account deficit.

“India is hot so far as the debt market goes,” Raj Kothari, a London-based fixed-income trader at Sun Global, said in an e-mail interview on April 16. The yield premium “will bring in lot of flows, plus the currency is helping,” he said.

The rupee, which sank to an all-time low of 68.845 per dollar in August, has since rebounded 14 percent, the biggest gain in the period among 78 global exchange rates tracked by Bloomberg. Foreign reserves surpassed $300 billion last month for the first time since 2011 as inflows quickened.

Aberdeen Asset Management Plc finds Indian bonds attractive as inflation cools and is maintaining an “overweight” position in the notes, Kenneth Akintewe, Singapore-based portfolio manager, said in an April 14 e-mail interview. The Reserve Bank of India left interest rates unchanged on April 1, after raising them three times since September, as price pressures eased. Consumer inflation declined to 8.31 percent in March from 11.2 percent in November, government data show.

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