Invesco Remains Bullish on Indian Bonds, Favoring Long-Term Debt Despite Index Delay
MUMBAI – Despite a recent setback regarding the inclusion of local securities in a premier global index, Invesco, one of the world’s leading asset managers, remains firmly optimistic about the Indian government bond market.
Norbert Ling, the head of fixed income portfolio management for Asia Pacific at Invesco—which oversees a staggering $2.45 trillion in global assets—asserted that India’s stable fiscal trajectory and steep yield curve make long-term sovereign debt an increasingly attractive prospect for international investors.
Strategic Appeal of the Yield Curve
According to Ling, the current structure of India’s yield curve offers distinct advantages for active managers. “The yield curve remains reasonably steep, offering more attractive carry and roll-down opportunities versus the front end,” Ling noted in an email to Reuters.
Market data underscores this sentiment: the benchmark 10-year Indian government bond currently yields approximately 6.87%, while the 5-year paper sits at roughly 6.49%. For investors looking further out, bonds maturing in 30 years or more offer yields in the range of 7.45% to 7.55%, providing a significant yield pickup.
The asset manager noted that while they have become more positive on Indian debt over the medium term, they are maintaining a selective approach, noting that Indian bonds currently offer superior value compared to many of their Asian counterparts. “We would favour selective exposure rather than a broad-based increase across the curve,” Ling added.
The Index Inclusion Outlook
The conversation surrounding Indian debt has been dominated by the country’s potential entry into the Bloomberg Global Aggregate Index. On July 31, Bloomberg announced a delay in adding Indian bonds to the flagship index, suggesting that while significant progress has been made, the recent market reforms require more time to become fully embedded in daily operations.
This decision came even after India implemented aggressive pro-market reforms, including the elimination of withholding and capital gains taxes for foreign investors and the expansion of the Fully Accessible Route (FAR) category, which removes limits on foreign investment.
Ling views the delay as a temporary hurdle rather than a structural failure. “Recent reforms have materially reduced barriers for foreign investors and brought India closer to the standards required for inclusion in the Bloomberg Global Aggregate Index,” he said. He expects that any eventual inclusion will act as a major catalyst, attracting passive inflows concentrated in liquid, long-duration benchmarks.
Structural Inflows Replacing Tactical Trades
The appetite for Indian debt is already evident; foreign investors have poured nearly $7 billion into the market since the beginning of June, primarily targeting FAR-eligible securities.
Ling believes this trend is a sign of a fundamental shift. He suggests that current inflows are more “durable” than in the past, as they are anchored by structural reforms and the anticipation of future index-linked allocations rather than short-term tactical trades. As a result, Invesco expects that the consistent application of market reforms will continue to diversify India’s foreign investor base, providing long-term support for the nation’s sovereign debt market.
