Why this major Indian insurer is buying more long-dated government debt

That’s the view of Arun Srinivasan, head of fixed income at ICICI Prudential Life Insurance Co. Ltd., the country’s fourth-biggest by market capitalization, according to Bloomberg-compiled data. 

In anticipating yields are close to their peak, he’s betting the Reserve Bank of India could possibly revive its Operation Twist program of 2019, when it sold shorter-dated debt while buying longer maturities to flatten the curve.

“This is the appropriate time to add longer duration bonds,” said Srinivasan, who oversees 1.3 trillion rupees ($15.7 billion) in fixed income debt. “We have been increasing duration and will continue to target every auction.”

Although the global bond market has suffered a 20% rout this year as central banks ratchet up interest rates to rein in inflation, ICICI is one of a number of investors growing more bullish on the asset class. 

Rick Rieder, BlackRock Inc.’s chief investment officer of global fixed income, told Bloomberg last week he sees opportunities in corporate credit. Strategists at Barclays Plc wrote that high-grade credit looked more attractive than equities. 

But the ICICI investor is still staying away from corporate bonds because the yield differential — currently roughly 30 basis points for 10-year debt — isn’t large enough yet to be enticing in light of of the additional risk. 

“I expect spreads to go back to their long term average of 55 to 60 basis points, if not more,” said Srinivasan.