Indian bonds have outperformed Chinese debt this year, and there are indications that this trend will continue. According to Bloomberg indexes, India's sovereign debt has yielded a return of 3.9% so far in 2024, surpassing China's 2.9% gain and outpacing the 0.6% loss experienced by emerging-market government bonds.
Global investors are attracted to India due to its robust economic growth, which remains one of the fastest in the world, especially when compared to China's slowing economy. While Indian bonds continue to thrive, China's central bank has taken measures to temper the bull run in its debt market, resulting in historically low yields on certain sovereign notes.
Fund managers are increasingly favoring India over China, considering the long-term growth prospects and expected returns. The announcement of India's inclusion in JPMorgan's index in September has attracted approximately $8 billion in foreign investor inflows, providing support to the bond market.
The Reserve Bank of India's vigilant control over its currency has resulted in a relatively modest depreciation of the rupee compared to its counterparts. Year-to-date, the rupee has only declined by 0.3%, while the yuan has experienced a loss of 1.6%.
India's bond market has also benefited from the government's reforms and disciplined fiscal policies. In contrast, China recently announced the issuance of $138 billion worth of ultra-long special bonds as a measure to support its economy.
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