Page 3 - Rising Bond Yeilds

Rupee, rising yields driving foreign portfolio investors away

Foreign investors have slowly started liquidating some of their holdings in local debt paper, as rising bond yields and the rupee's weakening bias make their investment not lucrative enough at a time when the US economy shows early signs of recovery.It is not that they are liquidating en masse; utilisation of their permitted limits show there is very little space left to invest. And, this is also a threat for local investors. In February, foreign portfolio investors (FPIs) sold $421 million in debt; in March so far, they have sold $133 mn. However, in January, they had bought $1.5 billion in debt.FPIs have exhausted 96.66 per cent of their permitted investible limit of Rs 1.913 trillion in government debt. In the case of corporate debt, they have exhausted 99.8 per cent of their limit of Rs 2.253 trn.However, the sell-off in February should not be seen as an arbitrary case. It could, say bond market experts, be seen as a precursor of things to come. Here's why:For a foreign investor, .