Indian government bond yields rose and prices fell following Bloomberg's decision to postpone the inclusion of Indian sovereign debt in its global fixed-income indices, citing insufficient market access and liquidity reforms. The move dampens investor sentiment ahead of potential capital inflows.
- Bloomberg deferred inclusion of Indian government bonds in global indices, citing market access and liquidity concerns.
- 10-year Indian government bond yield rose 7 bps to 7.23% following the announcement.
- 30-year bond yield climbed to 7.68%, reflecting heightened risk perception.
- Estimated $15 billion in passive inflows were anticipated from index inclusion.
- Foreign ownership of Indian government bonds stands at 3.8% of total outstanding debt.
- Domestic bond funds recorded ₹1,200 crore ($15 million) in outflows on the announcement day.
Indian government bonds experienced a downward correction in early trading after Bloomberg announced a delay in adding Indian sovereign securities to its global index family. The decision, effective immediately, pushes back the inclusion to a yet-undisclosed future date, citing inadequate progress on market access and investor protections. As a result, the yield on the 10-year benchmark Indian government bond rose by 7 basis points to 7.23%, while the yield on the 30-year bond climbed to 7.68%, reflecting growing risk premium pricing. The postponement underscores persistent structural challenges in India’s fixed-income market, particularly around foreign investor access and settlement timelines. International investors had anticipated a 2026 inclusion, which could have unlocked an estimated $15 billion in passive capital from index-tracking funds. The delay means that foreign ownership of Indian government bonds, currently at 3.8% of total outstanding debt, may remain constrained despite recent policy reforms. The move has triggered a reassessment among global asset managers. Portfolio managers tracking the Bloomberg Global Aggregate Index have begun recalibrating their India exposure, with some shifting allocations to other emerging markets such as Mexico and Indonesia. Domestic bond funds saw outflows of approximately ₹1,200 crore ($15 million) on the day of the announcement, signaling nervousness among retail and institutional investors. Market participants now await clearer timelines from Indian authorities on proposed reforms, including the introduction of a single-window clearance system for foreign portfolio investors and plans to extend trading hours to better align with global markets. Until then, the delay continues to weigh on India’s credibility as a frontier market destination for global fixed-income capital.