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India Bonds Surge on Oil Price Plunge
6 Nov
Summary
- Indian government bond yields dropped significantly this week.
- Falling crude prices due to US election boosted foreign investor interest.
- Foreign investors bought nearly 52 billion rupees of Indian bonds.
Indian government bonds demonstrated exceptional performance this week, significantly outshining other Asian markets. The benchmark 10-year yield recorded its most substantial weekly decline since October 2019.
This rally was primarily triggered by the US midterm election outcome, which led to a sharp fall in crude oil prices. For India, a major oil importer, lower crude costs are expected to help curb inflation and reduce pressure on government finances.
The drop in oil prices also bolstered the Indian rupee, easing the need for the Reserve Bank of India to maintain high yields to defend the currency. Consequently, foreign investors returned, making their largest weekly net purchase of Indian bonds since July, amounting to nearly 52 billion rupees.
The positive sentiment in the Indian debt market was further supported by a concurrent rally in US Treasuries, increasing the attractiveness of India's higher-yielding debt and contributing to its outperformance.
