Indian government bonds are set to be included in JPMorgan's emerging market government bond index from FridayOver the past few weeks, bond yields have fallen to around 7%, near all-time lows.
Anticipating the Wall Street bank's decision, alongside Bloomberg's move to include India in a similar index next year, markets have partly pushed up bond prices in 2024 despite the risks of inflation reigniting. About $20 billion to $40 billion is now expected to flow into the country, chasing limited supply.
After all, as bond prices rise their yields fall. The days of being paid between 8% to 10% to invest in such securities might be truly numbered. Over the past few weeks, yields have hovered around the 7% mark.Why? The lower yields will help the government borrow at cheaper rates and more sustainably grow its economy. It will also help widen its creditor base.
That should also push the banking sector to lend to more productive parts of the economy and drive growth.