India investors shifting to longer-dated bonds

India's 8.33 percent 2026 bonds remain the most-traded so far on Friday, continuing this week's pattern of increased volumes for longer maturity bonds such as the 8.20 percent 2025.

Traders say the likely introduction of a new 10-year benchmark paper in the next couple of months is prompting investors to shift activity away from the current 8.15 percent 10-year paper

As part of this shift, dealers say longer-dated bonds offer more attractive returns.

"There is a likely to be a higher fall in yields for the 2025 and 2026 paper than the 10-year, so traders finding it attractive to buy these ahead of the policy," a senior dealer with a foreign bank says.

The yield on the 2026 paper is down 1 bp at 7.94 percent, while the 2025 paper is also down 1 bp at 7.92 percent.

"It is natural for people to go long duration when interest rates are expected to be cut. Longer duration means more profit per basis point movement," said Aniruddha Iyer, assistant vice president with Quant Capital.

"Also 2025 and 2026 are fairly liquid securities, so reversal or square off is also quick".

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