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Indian sovereign bonds that are eligible to trade on global debt indexes saw their second weekly outflow, signaling overseas investors are cooling on the nation’s debt.
Global funds last week sold $104 million of the so-called Fully Accessible Route bonds – a special category of debt that’s freely available to foreigners, according to the Clearing Corporation of India data.
This follows withdrawals of about $200 million in the previous week – the first net sale of such bonds since the addition of Indian debt into JPMorgan’s index in June. Overall, foreigners have been net sellers of local bonds, prompted in part by Indian central bank’s reluctance to follow global monetary authorities in cutting rates.
The shift comes as traders pare back expectations for Federal Reserve interest-rate cuts, boosting the dollar. That’s putting pressure on emerging-market assets, with the gap between India and US yields narrowing. A return of almost 8% on Indian debt this year – among the highest in Asia – is also prompting some investors to take profit.
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