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FAR bonds lose their pull as tailwinds fade

The Times of India July 23, 2026

FAR bonds lose their pull as tailwinds fade - The Economic Times Benchmarks Nifty23,996.25-191.46FEATURED

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fade Powered By The Economic Times daily newspaper is available online now. Read Today's Paper FAR bonds lose their pull

as tailwinds fadeSECTIONSFAR bonds lose their pull as tailwinds fadeBy Rozebud Gonsalves, ET BureauLast Updated: Jul 23,

2026, 06:44:00 AM ISTRate StoryFollow usShareFont SizeAbcSmallAbcMediumAbcLargeSavePrintCommentSynopsisForeign inflows

into Indian government securities have begun to slow down. This moderation follows a strong surge in June driven by

index inclusion expectations. Narrowing yield spreads between India and the US are now a key factor. Concerns over rupee

weakness and delayed index decisions also contribute. Investors are reassessing the attractiveness of rupee-denominated

assets.The June rally in FAR bonds was fuelled by expectations of India's inclusion in global bond indices, attractive

carry offered by government securities, and policy support from the regulatory and the political establishment.Mumbai:

After a surge in June, foreign inflows into government securities under the Fully Accessible Route (FAR) have started to

moderate, as the factors that initially drove strong investor interest begin to fade. The June rally in FAR bonds was

fuelled by expectations of India's inclusion in global bond indices, attractive carry offered by government securities,

and policy support from the regulatory and the political establishment.However, the recent slowdown reflects narrowing

India-U.S. yield spreads, renewed concerns over rupee weakness and disappointment over the Bloomberg index rejig.Since

June 5, when the Reserve Bank of India (RBI) and the government announced measures to attract foreign capital, ₹53,289

crore has come into government securities through the FAR route. AgenciesSince June 5, when the Reserve Bank of India

(RBI) and the government announced measures to attract foreign capital, ₹53,289 crore has come into government

securities through the FAR route.Bonds Corner Powered By FAR bonds lose their pull as tailwinds fadeForeign inflows into

Indian government securities have begun to slow down. This moderation follows a strong surge in June driven by index

inclusion expectations. Narrowing yield spreads between India and the US are now a key factor. Concerns over rupee

weakness and delayed index decisions also contribute. Investors are reassessing the attractiveness of rupee-denominated

assets.Oil rally weighs on Indian bonds, value buyers limit fallIndia bonds slip on oil spike, bargain hunters curb

lossesICICI Bank eyes $500 million dollar bond issue via GIFT CityShorter-dated US Treasury yields ease in line with

lower oil price Browse all Bonds News with However, the pace of inflows has eased from the levels seen immediately after

the announcements. The largest single-day inflow was recorded on June 14 at ₹14,034 crore, while average daily inflows

over the past week have moderated to around ₹500 crore, CCIL data showed.Also Read: External sectors steady despite

geopolitical uncertainties: RBILive EventsThe moderation is driven largely by a less favourable yield differential

between Indian and U.S. government bonds. While Indian debt continues to offer relatively high yields, the premium over

US Treasuries has narrowed significantly, reducing the attractiveness of rupee-denominated assets for global

investors."Yes, Indian bonds are high yielding, but we have to remember that the world's biggest bond market is also

high yielding. The difference between India and U.S. rates has narrowed to 2-2.5% from 4-4.5%, so the U.S. is very

attractive, and we think investors would prefer the dollar market," said Daryl Ho, senior investment strategist at DBS

Bank.Additionally, many foreign investors had expected Bloomberg to announce a decision on the inclusion of Indian

government bonds in its Global Aggregate Index by mid-July. The delay in the announcement has prompted some foreign

portfolio investors to pare their holdings, adding to the moderation in inflows.Another key concern is the rupee's

recent depreciation.The currency was trading in the 94.50-94.60 per dollar range in mid-June but has since weakened amid

rising crude oil prices and escalating geopolitical tensions. The rupee closed at 96.56 per dollar on Wednesday, raising

concerns that currency losses could erode returns on rupee-denominated bonds.Add as a Reliable and Trusted News Source

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