2024's Untapped Fixed Income Opportunity: Exploring India's Eurobonds with 5-7% USD Yields

In 2024, Indian Eurobonds emerge as a standout opportunity within the fixed income landscape, offering yields ranging between 5-7% in USD. This unparalleled value is primarily driven by the anticipated interest rate cuts, a strengthening INR, and a consequent decline in bond yields. Despite the Reserve Bank of India’s (RBI) initial cautious stance towards policy adjustments, projections suggest a shift towards rate reductions during the 2Q – 3Q of 2024, with an expectation of 2-3 cuts. This policy shift, coupled with the INR’s potential appreciation to the 81-82 range by August-September 2024 — fuelled by Indian Government Bonds’ inclusion in the JP Morgan GBI-EM indices and the anticipated US$30-40 billion inflow over the next 6-12 months — underpins the currency’s strength and decreases volatility, laying a solid foundation for the attractiveness of Indian Corporate Eurobonds.

The strategic inclusion of Indian Government Bonds into JP Morgan GBI-EM indices not only underscores the growing confidence in India’s economic stability but also acts as a catalyst for significant foreign investment inflows. This backdrop is set to push the 10-year Government Bond yield to trade at an appealing 6.7%-6.8% by the latter half of 2024. Such a conducive economic and policy environment heralds Indian Corporate Eurobonds as one of the most compelling fixed-income investments on the global stage in 2024.

Investors seeking robust returns amidst a landscape of declining yields in other markets will find Indian Eurobonds an irresistible proposition, blending attractive yields with the promise of currency appreciation and reduced volatility, making it a prime time to consider diversifying into this emerging market gem.