Indian government bonds extended their rally on Thursday, with the benchmark 6.94% 2036 issue seeing its yield drop to 6.7180%.
The move reflects a confluence of easing inflationary pressures from lower oil prices and growing foreign investor appetite ahead of a potential inclusion in a major global index.
The decline in yields signals a repricing of risk as international capital flows into the market.
Traders are positioning for the prospect of India’s inclusion in the Bloomberg Global Aggregate Bond Index, a development that would likely trigger significant passive inflows.
This sentiment is bolstered by the recent softening in crude oil prices, which alleviates concerns about imported inflation and supports the central bank’s monetary policy outlook.
The bond market strength follows a broader recovery in Indian assets.