Invesco, a global asset manager with $2.1 trillion under management, is maintaining a positive stance on Indian sovereign debt, particularly focusing on medium-term maturities, according to comments from a senior fixed income executive.
Norbert Ling, who leads fixed income portfolio management for Asia Pacific at the firm, told reporters that the three- to seven-year portion of India’s government bond yield curve presents meaningful value. Ling said inflation pressures are unlikely to be long-lived and that markets may be overstating the potential scale of Reserve Bank of India (RBI) rate hikes prompted by risks from the ongoing conflict in the Middle East. He added that this creates an opportunity to fade recent sell-offs.
"The belly will be more rate sensitive," Ling said, referring to the three- to seven-year segment of the yield curve.
As of Monday, India’s 3-year bond yield stood at 6.28%, while 5-year and 7-year yields were at 6.69% and 6.93% respectively. Yields in those maturities have risen by 36-41 basis points since the U.S.-Israeli war with Iran began on February 28. Over the same interval crude oil prices have climbed by about 50%, a move that has raised concerns about inflation because India relies heavily on imports for its oil supply.
Market attention has shifted from talking about potential rate cuts, which seemed possible a few months ago amid relatively benign domestic price dynamics, to worrying about whether a sharp rise in crude-driven inflation could force the RBI to lift interest rates.
Ling cautioned that the policy outlook will depend on the extent of inflation pass-through from higher fuel prices, the future path of crude oil and any fiscal policy responses. For now, he argued, it is premature to take a firm position that the central bank will raise rates.
Invesco also views recent RBI actions to support the rupee as constructive. Ling said steps taken by the central bank to curb speculation have reinforced confidence by signaling that currency stability remains a priority.
Foreign investors have been net sellers of Indian government debt since the regional conflict escalated, offloading 160 billion rupees, roughly $1.70 billion, of bonds in March-April according to data from the Clearing Corporation of India. Ling described the move as largely tactical rather than structural, noting that foreign buying had been positive before the outbreak of the conflict.
He said India’s onshore fixed-income market still matters for overseas investors seeking investment-grade credit, offering yields around 7% alongside a robust growth backdrop.
Contextual notes (exchange rate) - The article uses an exchange rate of $1 = 94.1775 Indian rupees as provided.