India Seeks To Boost Liquidity In Shorter Bonds With RBI Curbs
The move is also a preemptive action to ensure India isn’t impacted by global outflows in the future, a person familiar with the matter said.
(Bloomberg) --
India is seeking to boost liquidity in shorter-term government bonds by restricting foreign investors’ access to some longer-dated notes, according to officials with knowledge of the matter.
Authorities want demand to be concentrated in bonds with tenors of 10-years and below to make the yield curve more flexible, the officials said, asking not to be identified as the matter is private.
The move is also a preemptive action to ensure India isn’t impacted by global outflows in the future, according to another person familiar with the matter.
Foreign funds will no longer be able to buy new government bonds with 14-year and 30-year tenors under the so-called Fully Accessible Route category, the Reserve Bank of India said Monday.
The decision comes as billions of dollars of inflows are expected after the nation was included into JPMorgan Chase & Co.’s flagship emerging-market bond index in June-end.
Read: India Will Shield Some Newly Issued Debt From Foreign Investment
The latest steps are adequate for now to manage liquidity in the market and check any potential volatility, one of the officials said.
A finance ministry spokesperson didn’t immediately respond to a request seeking comments.
India’s bond yield curve is set to steepen following the central bank’s move to restrict foreign access to some notes, said Eric Fine, head of emerging-markets active debt at Van Eck Associates. The decision will channel demand into tenors of 10 years and below, Fine said.
Indian bonds in the affected tenors were little changed after the decision.
More stories like this are available on bloomberg.com
©2024 Bloomberg L.P.
