GOING FAR WITH INDIA FAR BONDS

At 7.10% yield and a duration of 6.52 years, Indian Government Bonds (IGBs) offer a compelling yield pickup over its emerging markets peers alongside attractive risk-adjusted return potential. Despite exceeding US$1T in size, access to the IGB market by foreign investors had been limited. Since 2020, the Fully Accessible Route (FAR) program has allowed foreign investments into IGBs without any restrictions. 

Today, while India FAR bonds represent 36% of the total IGB market, foreign ownership in IGBs is still one of the lowest at ~2%. Investors tapping into the India market through FAR bonds stand to reap diversification benefits from their low correlation with other major fixed income markets.

This month, we dive into how with ETFs, investors can now bypass the complex challenges of directly investing in IGBs and easily access the asset class which is becoming an increasingly important building block in global portfolios.  

Sources: BlackRock, Bloomberg, as of 29 February 2024. Bank for International Settlements as of 31 December 2022, JP Morgan as of 31 August 2023, Clearing Corporation of India as of 31 December 2023.