At $127.3 bn, RBI’s Hold­ing of US Trea­suries at All-time High

In­dia now the sixth-largest Asian holder of US se­cu­ri­ties; Mar­ket feels RBI ex­pects only a grad­ual rate hike in US

The Economic Times - - Finance & Commodities -

Mum­bai: The Re­serve Bank of In­dia’s hold­ings of US Trea­sury bonds touched an all-time high, likely re­flect­ing the cen­tral bank’s view that US rate in­creases may not be quick, but grad­ual.

At $127.3 bil­lion in May, In­dia was the sixth-largest Asian holder of the safest fi­nan­cial in­stru­ment, ac­cord­ing to data from the US Depart­ment of the Trea­sury. Glob­ally, the coun­try was ranked 12th, af­ter Saudi Ara­bia, which in­vested in Trea­sury bonds worth $134 bil­lion.

“RBI­may­haveused­it­shugepileof forexre­ser­vesto­buyUSTrea­suries, the­safest­bet­foranye­merg­ing­coun-

RIS­ING HIGH

$ In­dia’s share of US trea­sury bonds in May $ Saudi Ara­bia’s share of US trea­sury bonds

try,” said Soumya Ghosh, chief econ­o­mist at State Bank of In­dia. “Such record high monthly in­vest­ment also de­picts RBI’s as­sess­ment on how US Trea­suries would move. Our cen­tral bank pos­si­bly could see lim­ited rise in yields. Such large in­vest­ment could fruc­tify in hand­some gains if yields fall from the Rank of In­dia glob­ally

cur­rent lev­els.” In­dia’s for­eign ex­change re­serves have risen over the past few months, hit­ting a record level of about $391 bil­lion last week from about $381 bil­lion in May. The US bench­mark yield was as high as 2.63% dur­ing March amid Fed­eral Re­serve rate in­crease hopes.Theyield­now­is­about2.30%, US DEBT STOCKS (top coun­tries)

– JA­PAN

– CHINA

al­most sim­i­lar to the level in May.

Alow­erUSyield­en­hances­the­gap, or­spread,be­tweenUSandIn­di­asovereign bonds, billed as a trig­ger for over­seas in­vestors bet­ting big on do­mes­tic debt se­cu­ri­ties.

Fall­ing US yields ide­ally pave the way for a rate cut, which is now per­ceived to be adding the coun­try’s growth. When­ever the RBI cuts rates, the gap nar­rows.

“It will be in­ter­est­ing to know if RBI con­tin­ues to hold such a view amid its bi-monthly pol­icy de­ci­sions,” said Ghosh.

Ja­pan and China (Main­land) are the top two coun­tries, hold­ing $1,111.3 bil­lion and $1,102.2 bil­lion, re­spec­tively, in US debt stocks.

Ris­ing US Trea­sury in­vest­ments have as­sumed sig­nif­i­cance with both the coun­tries strength­en­ing diplo­mat­ic­ties.“Ourtieshaven­ever been­strongerand­bet­ter,”Pres­i­dent Don­ald Trump said at a joint press con­fer­ence when Prime Min­is­ter Naren­dra Modi vis­ited the White House in June.

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