Japanese household investors are buying rupee-linked bonds like never before as negative interest rates at home prompt them to take greater risks in search for yield.
The amount of Uridashi notes sold in the Indian currency surged to a record $1.45 billion this year from 105 offerings, making up 6.2 percent of the total issuance, and surpassing Turkey and New Zealand to enter the top five target nations. The rupee is projected to climb 8.1 percent against the yen by the end of 2017, the most in Asia, according to surveys of analysts by Bloomberg.
"Pull factors like the improving India growth outlook and relatively attractive yields are driving Japanese investors to such debt," said Kaushik Rudra, Singapore-based head of rates & credit research at Standard Chartered PLC. There are also "push factors such as the low-yield environment globally and accommodative monetary policy," he said.