Indian bond yields close flat on day 3 after JP Morgan global bond index inclusion

Indian bonds were gradually added to the JP Morgan Bond Index – Emerging Markets over a 10-month period, with the final inclusion occurring on June 28.

Indian bond yields, especially 10-year benchmark bond yield, ended almost flat on the third day after inclusion in the JP Morgan global bond index.

The yield on 10-year benchmark bond, 7.1 percent 2034, ended at 7.0112 percent, as compared to 7.0105 percent close on the previous trading session.

The old 10-year benchmark bond, 7.18 percent 2033, closed today at 7.0548 percent, as against 7.0567 percent close on the last trading session.

"The trading was lacklustre owing to the unhurried pace of bond inclusion inflows in last two days, which was disappointed the Market. Now, the market is positioning for the outcome of full budget of course, rise in US yields and crude prices are adding pressure to the yields," said V. Ramachandra Reddy, Head Treasury, The Karur Vysya Bank.

Indian bonds were gradually added to the JP Morgan Bond Index – Emerging Markets over a 10-month period, with the final inclusion occurring on June 28.

JP Morgan has included 29 Indian government securities under the fully accessible route (FAR) in its emerging market index. Currently, India carries a 1 percent weight in the index, with planned incremental increases each month until March.

According to CCIL data, foreign portfolio investors' (FPIs) FAR holdings rose to Rs 1,87,969.932 crore on July 2 from Rs 1,84,761.90 crore on June 27.

As of July 1, FPI ownership in the 7.18 percent 2033 bonds was 12.42 percent, up from 12.17 percent on June 27. However, FPI ownership in the new benchmark bond, the 7.1 percent government security maturing in 2034, decreased to 4.3 percent from 5.08 percent over the same period.

FAR allows non-residents to invest in specified Indian government securities without any investment ceiling.