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The first is the inclusion of the benchmark 30-year bond under the Fully Accessible Route (FAR), which is expected to broaden demand from foreign investors. The second is the ongoing financialisation of household savings, with allocations gradually shifting away from bank deposits toward retirement and long-term savings products, supporting sustained demand for longer-duration government securities.
The bank also expects Indian bonds to be included in Bloomberg’s Global Aggregate Index with a likely mid-year announcement, and inflows of $15 billion in the phase-in period, if the securities are included. “We prefer the ultra long-end segment of the yield curve as more ultra-long bonds enter the FAR universe… and due to financialization of household savings, where allocations are shifting away from banks to retirement savings, including pension funds, Public Provident Funds and insurance companies, which should gradually increase the structural demand for ultra long-end bonds,” said Danny Suwanapruti, strategist, Goldman Sachs, in a note.
Goldman Sachs is advising investors to buy India’s 30-year government bonds, anticipating a yield drop. This optimism stems from two key factors: the benchmark bond’s inclusion in the Fully Accessible Route, expected to boost foreign investment, and the growing trend of household savings shifting towards long-term financial products. Analysts foresee potential inflows and a significant yield decrease, making these bonds an attractive proposition.
The investment bank recommends entering the 30 year bond at 7.34%, where they forecast the yield easing to 6.90%. The stop loss is recommended at 7.65%, the report said. The key risk to this trade is a global sell off in long end bonds, possibly due to hawkish remarks by the US Fed or if domestic inflation or fiscal risks reemerge.
Indian government bond yields have eased since the RBI and government announced coordinated measures to attract foreign capital earlier this month. The 10 year yield has eased 22 basis points since then and closed at 6.75% on Monday.
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https://economictimes.indiatimes.com/markets/bonds/goldman-sachs-favours-going-long-on-30-year-govt-bond/articleshow/132081601.cms
