MUMBAI: The Reserve Bank of India has bought about $1 billion of US Treasuries after selling a record $21 billion in March, when it faced an exit of foreign portfolio investors.

India is ranked 12th in the list of nations holding US bonds, surpassing Singapore.

Economists say purchases of US treasuries by the RBI could surge in the weeks ahead as India’s forex reserves have gone past $500 billion.

“RBI invests in US Treasury bonds not for yields but security,” said Madan Sabnavis, chief economist at Care Ratings. “With swelling reserves, India’s share of such investments is likely to rise, which in turn will shield against any economic crisis.”

“Globally uncertainties will persist in the aftermath of coronavirus,” he said.

Foreign holdings in the world’s most liquid sovereign securities rose to $157.4 billion in April versus $156.5 billion in March, official data from the US government showed.

India’s foreign exchange reserves surpassed the half-a-trillion dollar mark a week ago. The gauge rose by $5.9 billion to $507.6 billion for the week ended June 12, scaling up record levels, latest RBI data showed on Friday.

Between April 3 and May 1, the central bank shored up reserves by more than $7 billion.

“Investment in US Treasuries is a global phenomenon at times when investor risk appetite is very low,” said Rajni Thakur, chief economist at RBL Bank. “As long risk appetite remains muted, central banks/investors globally will keep increasing their holdings in US treasuries.”

In the past one month, the Bloomberg spot dollar index, which measures the unit against major world currencies, dropped nearly 2%. During the same period, the rupee lost 0.73% versus the greenback, reflecting the fact that the rupee failed to gain from dollar weakness.

“The central bank seemed to be actively buying dollars to shore up reserves, which in turn, checked the local unit’s rise despite dollar weakness,” said K N Dey, founder of United Financial, a forex advisory firm.

The top two sovereign holders of US Treasuries are Japan and China although both have cut their holdings recently.

China’s total investment is now pegged at $1.07 trillion versus $1.08 trillion in March.

Singapore now owns $146.1 billion worth of US Treasury bonds compared with $151.5 billion in the preceding month.

India’s Monthly Investment in US Treasury

MonthAmount in $ billion
January164.3
February177.5
March156.5
April157.4



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