Indian government bond yields saw a slight increase after being included in JP Morgan’s Government Bond Index-Emerging Markets (GBI-EM). The benchmark 10-year government bond yield closed at 7 per cent on June 28, 2024, up from 6.9 per cent previously. Yields are also 2 basis points higher than last weekend’s close at 6.97 per cent.
Market participants are optimistic about the 10-year yield slipping, as they expect two US Federal Reserve rate cuts in FY25, despite revised projections for only one rate cut this year. Foreign inflows have been lacklustre, but monthly inflows remain strong. In June 2024, foreign banks purchased Rs 46,954 crore worth of government bonds, while foreign portfolio investors bought Rs 15,616 crore worth.
There is anticipation that Indian government bonds may be included in the Bloomberg Barclays EM Index and FTSE Russell Index, which could lead to increased inflows into the Indian bond market. Experts believe that this move could also decrease corporate bond yields due to index inclusion, thereby deepening the Indian bond markets.