Currency risk, political uncertainty and a tighter
regulatory regime have all made masala bonds unattractive
following their heyday in 2016, but things are looking up
for the second half of 2019, according to bankers and
A source at an Indian bank said that as masala bonds are
rupee-denominated but issued outside of India, they do well
when the local currency is stable or appreciating.
With the macro economy worsening and currency depreciating
in recent months, the demand for masala bonds has been low.
"Issuers and borrowers can’t rely on masala bonds
as a reliable source of funding," said the source. The
volatility in the currency markets has meant offshore investors
are cautious about taking on exchange risk on the Indian
Tightening global liquidity in the past few months, as a
result of declining market conditions, has also been an issue.
"Owing to macroeconomic factors such as the...