A surprise bond rally sweeps over India as global funds pile in

The quick turn in sentiment came after the benchmark 10-year yield rose to its highest since March, accentuated by a Reserve Bank of India policy review held on August 6

A rally in India’s sovereign bonds, fueled by mutual funds and overseas investors after weeks of indifference, has left most Mumbai traders baffled at their sudden fortune.

Yields dropped across the curve last week, with those on the benchmark 10-year bond declining ten basis points, the biggest weekly drop since April. Government debt auctions are finding buyers again, after a spate of earlier sales were canceled or rescued by underwriters.

“The sudden demand is surprising,” said Ritesh Bhusari, deputy general manager for treasury at South Indian Bank Ltd. “The lower inflation trajectory for the next two months and global factors