Foreign investors pivot to short term Indian debt
Overseas investors are increasing holdings in Indian government bonds with maturities under five years as yields spike due to inflation concerns. Markets are factoring in a potential shift toward tighter monetary policy from the Reserve Bank of India following energy shocks linked to the Iran war.
Foreign investors increased short-term India government debt holdings to over 66% of top bond purchases between March and May. This shift follows a 55-basis-point surge in five-year yields as conflict in Iran drives energy-linked inflation. Investors are positioning for a hawkish policy pivot while capturing higher risk-adjusted carry.
