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India's 2026-2032 govt bonds continue to see FPI selling, long-end sees inflows

 It seems like there's a bit of a divergence in the behavior of India's government bonds. While shorter-duration bonds are facing selling pressure, longer-duration bonds are seeing buying activity. This trend has persisted into May, with traders attributing it to the unwinding of positions established through total return swaps.

Foreign investors have been net sellers of shorter-duration bonds maturing between 2026 and 2032, totaling 50 billion rupees. However, they've also been net buyers of benchmark longer-term bonds such as the 2033, 2037, and 2053 bonds, amounting to 15 billion rupees in total. Notably, bonds under the Fully Accessible Route (FAR), which have no investment limit, are set to be included in JPMorgan's emerging market debt index starting from June.

Despite the selling pressure on shorter-duration bonds, traders maintain a positive outlook overall. They point to the lack of selling pressure on the long end of the curve, suggesting that this shift is more about unwinding trading positions rather than a fundamental shift in sentiment.

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