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A $19 Billion Derivative Bond Trade in India Will Unwind With Modi’s New Tax

  • Bond forward-rate trades in India may drop by 20%, DBS says
  • The trades have boosted demand for long-tenure sovereign bonds
Updated on

A derivative trade that boosted demand for India’s sovereign bonds by billions is at risk from a proposed tax, piling pressure on a market straining under record government borrowings. 

Analysts say a New Delhi plan to tax high-value insurance policies will reduce demand, leading the industry to cut back on bond investments. For the past two years, banks have boosted the amount of debt bought for interest-rate swaps offered to insurers.