India 10-Year Bonds Rise as Foreign Investment Cap Under Review

India’s benchmark bonds advanced the most in two weeks on optimism the nation will allow global funds to buy more debt.

The Reserve Bank of India is in talks with the government on resetting the limit for foreign investors in rupee terms, as against dollars at present, Deputy Governor H.R. Khan said Monday. The central bank and the nation’s markets regulator will discuss a plan to examine the cap on overseas holdings of government debt, Governor Raghuram Rajan said last week. The rupee was little changed.

“The RBI comments have provided some comfort on more buyers coming in,” said Paresh Nayar, the Mumbai-based head of currency and money markets at the local unit of South African lender FirstRand Ltd. “With the monsoon rainfall on course, the market is now also looking at the possibility of another rate cut.”

The yield on the sovereign note due May 2025 fell for the fifth day, dropping five basis points to 7.75 percent, the longest winning streak for a benchmark 10-year debt since October 2014, according to data compiled by Bloomberg.

Foreign institutional investors have almost exhausted the current $30 billion limit. Expressing the limits in rupees will provide more room for more foreign buying of debt.

The government would ideally like debt limit at current rupee rate, Finance Secretary Rajiv Mehrishi said in New Delhi on Monday. The weather bureau Monday said June-September seasonal showers have been normal. RBI has linked further monetary action to the outcome of the current monsoon.

The rupee gained 0.1 percent to 63.4050 a dollar in Mumbai, according to prices from local banks compiled by Bloomberg.

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