Inflows into index-eligible Indian bonds set to hit $10 billion

Foreign inflows into India’s sovereign bond market are closing in on the $10 billion mark ahead of the country’s inclusion in the JPMorgan Chase & Co’s emerging markets debt index.

Investments into index-eligible Fully Accessible Route bonds have risen by 812.18 billion rupees ($9.8 billion) since the announcement in September, data from the Clearing Corp. of India show. Inclusion starts in phases from June.

The biggest purchases are in the shorter bonds maturing between 2026 and 2030, the data show. The highest foreign holding is in the 7.37% 2028 note, accounting for 20.8% of the outstanding.

“Rupee sovereign bonds are poised for further gains on strong foreign inflows, largely front-running the upcoming bond index inclusion,” analysts at DBS Bank led by Radhika Rao wrote in a note.

Bloomberg Index Services Ltd. will also include some India bonds in its emerging market local currency index starting next year. Bloomberg LP is the parent company of Bloomberg Index Services Ltd., which administers indexes that compete with those from other service providers.

The yield on the benchmark 10-year bond slipped to 7.01% on Monday, the lowest since June.