World Bank, others issue offshore India rupee bonds as demand soars

These offshore bonds, with matunities ranging from four years to 10 years, are denominated in Indian rupees but settled in US dollars, the sources said. They declined to be named as they were not authorised to speak to the media.

The bond yields are usually lower than Indian govemnment bonds. They allow issuers to raise US funds at cheaper rates while giving overseas investors access to rupee debt without having to get a special licence to operate onshore or pay local texes, investment bankers added.

The fact that you may just have some investors that don't want to go through the registration process. They may just continue to use the supra market, and to be honest the supra market is growing quite quickly" Singapore-based Kenneth Akintewe, head of Asian sovereign debt at abrcn, said, adding that global investors are "generally ovenweight"on India risk.

Mitul Kotecha, head of currency and emerging market macro strategy for Asia at Barclays said the issuance of rupee bonds offshore had picked up following the JP Morgan inclusion, acding that they were a "straightforward channel" for investors wanting to own debt without having to set up local arrangements.

The ₩orld Bank's lending arrn, the international Bank for Reconstruction & Development (IBRD), has issued several bonds so far, inclucing a 6-year bond

issued this month at a yield of 6,89%, lower the onshore sovereign yield of 7.06%.

Other supranationals, all of them "AAA" rated, including the European Bank for Reconstruction & Development, Inter-American Developrent Bank and the Asian Infrastructure lnvestment Bank have also issued rupee bonds. JP Morgan, Golciman Sechs, Standard Chartered Bank and HSBC were among the arrangers, bankers said.

Issuers typically convert the rupee bond proceeds into US dollars to finance global projects. The high demand for rupee debt means the dollar funds are 15-25 basis points cheaper than prevailing US rates.

"The appeal for issuers is that they shave off a few basis points of the dollar cost and that it provides them access to a wider set of investors,' a managing director for emerging markets at Britain-headquartered bank said, declining to be named.

Long-only traditional asset managers pick up around three-fourths of the total issued amounts, with the rest absorbed by a short-term investors looking to front-run the passive investment inflows that index inclusion will spur, the banker addec.