World's biggest money manager keen to add to its holdings of Indian bonds

BlackRock Inc., the world’s largest money manager, plans to add to its holdings of Indian bonds, lured by one of the highest yields among emerging Asian nations and the promise of more monetary easing.

“We are looking at some stabilization and would potentially look for adding exposure” after the risks from the likely increase in federal borrowings settle, Neeraj Seth, head of Asian credit at the firm, said in a phone interview.

Rupee debt sold off in the past two months, the longest run of losses in a year, after the government’s surprise $20 billion tax cut sparked fears of missing deficit targets. At the same time, with the 10-year yield at 6.70%, India offers plenty of premium to developed markets.

“The current 10-year yield level has started to look attractive,” Seth said, adding the fund likes the five-year and 10-year bonds.

Yields have surged more than 30 basis points in the past two months, driven up recently by fears that the unexpected tax cut will boost an already bloated bond supply. Even an expected interest-rate cut by the central bank on Friday -- the fifth for the year -- has done little to aid sentiment.

Standard Chartered Plc estimates the government will need to borrow as much as 800 billion rupees more, and Fitch Ratings flagged the likelihood of a wider fiscal deficit. The government’s borrowing plan remains unchanged for the rest of the fiscal year, Economic Affairs Secretary Atanu Chakraborty told reporters Monday.

“The market is concerned about higher supply brought by the corporate tax reforms, which requires higher level of borrowings,” Seth said. “The market has been readjusting for that.”