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Informist, Friday, Sept. 18, 2026

 

MUMBAI – Foreign portfolio investors Friday logged their biggest single-day purchase of Indian government bonds since Jun. 15, even as the interest rate differential between the US and India has narrowed sharply since the war in West Asia began. This large purchase comes after eight consecutive days of net sales. Foreign portfolio investors net bought gilts worth INR 48.88 billion through the Fully Accessible Route Friday, according to latest data from Clearing Corp. of India. 

 

Most of these purchases were concentrated in the five-year benchmark 6.36%, 2031 bond and the 6.54%, 2032 bond, as per the data. Foreign investors picked up INR 25.80 billion of the 2031 bond and INR 23.60 billion of the 2032 bond. Their ownership of the 2031 bond Friday rose to 14.42% of the bond's outstanding from 12.33?ay earlier. 

 

Prior to Friday, FPIs have net sold gilts worth nearly INR 100 billion over eight sessions. This week, the 10-year US Treasury note is trading around 5%, the highest since late 2023. The yield has risen about 105 basis points since the war in West Asia began, while the 10-year benchmark Indian government bond yield has risen 41 bps. This narrowing interest rate differential between the two securities typically makes emerging market debt less appealing than safe-haven assets to foreign investors.

 

The large purchases of short-term gilts come just days after the US Federal Open Market Committee raised the fed funds target rate by 25 basis points, and at a time when most traders are averse to short-term gilts due to expectations of the bond yield curve flattening further. The spread between the 10-year benchmark 6.94%, 2036 bond and the 2031 bond compressed to 30 bps Friday from 40 bps on Sept. 11. Albeit, the 2031 bond outperformed other tenures Friday, and ended 5 paise higher while the 10-year benchmark ended 15 paise down. During market hours, traders had said that the 2031 bond outperformed due to FPI purchases.  End

 

Reported by Cassandra Carvalho

Edited by Deepshikha Bhardwaj

 

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