India bought an unprecedented amount of US Treasury securities in July, with net acquisition totaling $15.2 billion. That was a big step up from $3.39 billion in June and lifted its holdings to the largest level in 10 months, the US Department of the Treasury said.
The spike followed $40.8 billion of inflows through the end of July under a Reserve Bank of India special window that the central bank announced in early June. Under that program the RBI provided concessional swaps for funds obtained via diaspora deposits and overseas borrowing.
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Vivek Rajpal, an Asia strategist at JB Drax Honore in Singapore, said the swaps created dollar-denominated liabilities on the RBI's balance sheet and that the RBI would have placed those dollars into dollar assets. Rajpal added that buying Treasuries lets the RBI earn carry to help offset the cost of the swaps and he expects purchases to stay high since reserves continued to rise in August. The reporting cites Bloomberg and the US Department of the Treasury.
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