10-year government bond yields fell to an eight-session low as investors rushed in after media reports pointed to progress in including local bonds in global indexes.
The rally in the bond market also caused yields to fall for the sixth consecutive week.
The 10-year Treasury yield finished at 7.2173% after closing at 7.2929% on Thursday, marking the largest single day decline since Aug. 17.
Yields fell five basis points this week, after falling 17 basis points in the past five weeks. The new 10-year 7.26% 2032 bond yield closed at 7.2049%. It had ended Thursday at 7.2773 percent.
“The positive talks regarding the inclusion of indices have led to a sharp rise in prices and any further progress could trigger similar moves in the future,” said Nandan Pradhan, deputy general manager of treasury at Cosmos Bank.
Earlier in the day, the Financial Times reported that JPMorgan is in talks with major investors about adding India to its emerging market bond index.
The bank is seeking investor views on whether much of the Indian government bond market could qualify for inclusion in the GBI-EM Global Diversified index of local currency debt, according to the report.
Goldman Sachs had said earlier this month that it expects India to be included in global bond indexes by 2023, potentially leading to passive inflows of about $30 billion.
If Indian bonds are included in global indices, it will broaden the investor base at a time when the government wants to borrow record amounts through bonds to reduce a record deficit.
Similar talks about withdrawals in January had attracted about 60 billion rupees ($752 million) in foreign portfolio flows into bonds that month.
So far in August, investors have bought net bonds worth more than rupees 39 billion.
Market participants are also focused on Federal Reserve Chair Jerome Powell’s comments later in the day at the Jackson Hole symposium, which will shed light on the Fed’s thinking on interest rates.
Traders are also waiting for India’s growth figures, which are expected on August 31. The economy is expected to grow at an annualized 15.2% in the April-June quarter, mainly due to a weak base last year, a Reuters poll of 51 economists found. .