Ultra-Long Indian Bond Yields Surge 40-47 bps: Bharti AXA CIO Eyes Fresh Positions Despite RBI Cuts

 A recent surge in ultra-long Indian government bond yields has made them attractive for building fresh positions, the head of investments at Bharti AXA Life Insurance said on Tuesday.

"For the long-end, current levels on the 30–40-year papers are decent and attractive," said Rahul Bhuskute, chief investment officer at the private-sector insurer that manages debt assets worth around 190 billion rupees ($2.1 billion).

The yields on the 30-year and 40-year notes have climbed 40 basis points and 47 bps so far this financial year despite the Reserve Bank of India (RBI) slashing its key repo rate by 100 bps in this period.

"The longer-end has a very different demand supply skew at this point, where RBI actions have not had any impact at all. The curve has steepened significantly, and it is peak steepening for us," Bhuskute told Reuters in an interview.

India's ultra-long-term bonds have faced a demand-supply mismatch for the last few months, despite the government reducing such auctions during the October-March period.

Demand remained weak, with softer insurance inflows and pension funds shifting to equities after regulatory tweaks earlier this year.

Market participants remain cautious despite the central bank's inclusion of such bonds in open market purchases.

"We believe that the yields will remain range-bound till a further trigger emerges for a movement either way, which would possibly be more upward rather than downward hereon," he said.

For state debt, the CIO favours shorter-duration papers, which should help accrue gains amid limited supply.

Accrual refers to the steady interest income earned from holding bonds, rather than trading them for price gains.

"Currently, we have a barbell strategy. We are looking at state debt with maturities of 4-7 years for accrual, and for the longer-end, central government bonds are at good levels to lock into."