Domestic Bonds

India’s exposure to US stocks exceeds $ 20 billion in 3 months

India’s holdings of U.S. government securities jumped from more than $ 20 billion in just three months at the end of June to $ 220.2 billion amid rising foreign exchange reserves.

Compared with June of last year, when most economic activity was ravaged by the coronavirus pandemic, India’s exposure to US Treasuries jumped by nearly $ 40 billion.

The latest data from the US Treasury Department showed that India, with a value of $ 220.2 billion at the end of June this year, is the 11th largest holder of these securities while Japan has the most exposure with just over $ 1,277 billion.

India has steadily increased its exposure to Treasuries since March, when it stood at $ 200 billion. In April, holdings rose to $ 208.7 billion, then to $ 215.8 billion at the end of May.

In February, the country’s exposure stood at $ 204.4 billion, down sharply from January’s $ 211.6 billion. The detention stood at $ 182.7 billion at the end of June 2020.

Unmesh Kulkarni, managing director and senior adviser to wealth management firm Julius Baer India, said India’s increasing exposure to US Treasuries must be seen against the backdrop of the continued accumulation of country’s foreign exchange reserves.

“US Treasury yields, after hitting a low around the middle of last year and rising steadily thereafter, have been declining since May 21, while the RBI has been gradually increasing its exposure since April 21,” a- he told PTI.

India’s foreign exchange reserves stood at $ 619.365 billion in the week ended August 13 after hitting a record high of $ 621.464 billion in the previous week.

Kulkarni noted that domestic liquidity in Indian money markets is high and that the RBI has attempted to normalize the liquidity situation through floating rate reverse repo auctions.

“The increase in foreign exchange reserves adds to the national rupee liquidity, so it makes sense for the RBI to drain some of the excess liquidity by purchasing foreign exchange assets.

“Among forex sovereign assets, the US dollar is generally the RBI’s preferred currency; Contrary to market expectations, the US dollar has been stable so far in the current calendar year and has actually appreciated 4.1% (dollar index) and 1.8% against the INR, ”he said, adding that apart from the RBI, we learn that Indian commercial banks have also started to deploy some of their surplus funds in foreign sovereign papers.

In terms of holding US Treasury securities, Japan leads the way followed by China with an exposure of $ 1,061 billion at the end of June.

In third place was the United Kingdom with a value of 452.9 billion USD, followed by Ireland (322.9 billion USD), Luxembourg (301.8 billion USD), Switzerland (270.1 billion USD) USD), Brazil (249 billion USD), Cayman Islands (244.8 billion USD), Taiwan (239.4 billion USD) and Belgium (228.5 billion USD), according to the data.

Nimish Shah – Chief Investment Officer – Listed Investments of wealth advisory firm Waterfield Advisors said the RBI and banks have started increasing their exposure and investing surpluses in US Treasuries on the basis of revised rules for invest in offshore sovereign securities.

“The strength of the US economy and currency relative to other countries makes the United States a preferred destination. Banks that had reached the limit for investments in unlisted investments, including foreign sovereign bonds, were pushing to increase the limits. forward rate, ”Shah said.

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