India’s $1-trillion bond market sees rising heft of insurers
The growing wealth of India’s public is leading to a crucial shift in its $1 trillion sovereign bond market.
Their savings — channeled through life insurers, provident and pension funds.
Which are increasingly getting plowed into long-term debt, leading to a structural change in the costs of borrowing for Prime Minister Narendra Modi’s government.
India’s yield curve has flattened markedly as the insurers and pension funds snapped up 10-to-40 year debt, with HDFC Life Insurance Ltd.
Saying that market participants are asking the central bank to sell more longer-dated bonds.
“Insurance companies have been one of the key investors in long-maturity bonds,” said Badrish Kulhalli, head of fixed-income at HDFC Life.
“As the penetration and reach of distribution channels increase, we expect that the growth in the sales of the traditional products to continue to grow, and consequently the demand for long-maturity bonds” he added.