Key facts
- Short-term Indian government bond yields reached a three-month low.
- The yield curve for Indian debt steepened to a one-year high.
- The Reserve Bank of India introduced measures to boost dollar inflows.
- These measures include subsidizing hedging costs for foreign currency deposits from non-resident Indians.
Short-term Indian government bond yields declined to their lowest point in three months on Wednesday, causing the yield curve to steepen to a one-year high. This trend is driven by market expectations that banks will allocate funds acquired through the Reserve Bank of India's (RBI) recent dollar inflow initiatives into this specific debt segment.
On Friday, the RBI announced measures designed to attract foreign currency deposits from non-resident Indians. A key component of these measures is the full subsidization of hedging costs for foreign currency deposits with maturities ranging from three to five years, provided they are raised by September 30.