Indian bonds suffer first weekly outflow since joining the index

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Indian government bonds eligible for inclusion in global debt posted their first weekly outflow since being added to JPMorgan Chase & Co.’s emerging market bond index.

Foreign investors sold 16.8 billion rupees ($200 million) worth of so-called “fully accessible route” bonds last week, according to the Clearing Corporation of India. That’s the first such outflow since joining the JPMorgan index in June and the largest since the week ended May 10, data showed.

The outflows came amid an uncertain outlook for Federal Reserve interest rate cuts and elevated crude oil prices due to geopolitical tensions. According to Morgan Stanley, the size of weekly sales remains modest compared to the average weekly inflow of $570 million since index inclusion.

“There was an unwinding of total return swap deals, leading to debt outflows due to changing Fed interest rate expectations and a fall in US yields,” said Naveen Singh, head of trading at ICICI Securities Primary Dealership Ltd.

Read: FTSE nods to Korea and India for bond indices, praises reforms

While the inclusion in the FTSE Russell and Bloomberg emerging market indices announced last week will have limited additional impact on passive inflows from January 2025, it is likely to increase the attractiveness of duration for Indian bonds, write Morgan Stanley strategists Nimish Prabhune and Min Dai in a note.

Bloomberg LP is the parent company of Bloomberg Index Services Ltd., which manages indices that compete with other providers’ indices.

– With assistance from Ronojoy Mazumdar and Catherine Bosley.

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