India buys $20-bn US treasury bills in just 6 months

MUMBAI: It's not just hedge funds and battered institutions that have rushed to pick up US government bonds, long considered the safest investment despite abysmal returns. These securities have also become irresistible to central banks of emerging markets such as India.

India has lent close to $20 billion to the US government over six months since the collapse of iconic investment bank Lehman Brothers.

According to the latest data shared by the US treasury department, India���s outstanding exposure to US government bonds rose from $18.3 billion in October ���08 to $38.2 billion in March ���09. The latest tranche of investment into treasuries has made India the fourth-largest creditor to the US after China, Japan and Russia during this period.

While India���s outstanding debt exposure to the US government pales in comparison with the top three investors, the $20 billion incremental investment is significant considering the low base prior to Lehman���s collapse.



India has now emerged among the top 15 lenders to the US, moving up by at least five notches over the period under review. Though corporates, banks and other financial institutions can subscribe to US treasury bonds, in the case of India, RBI accounts for a large chunk of the investments.

���Essentially, it���s an indicator of flight to safety by central banks. The general view among central banks is that the dollar may not depreciate much in the medium to long term,������ Sailesh Jha, director, Asian Economic Research, Barclays Capital, told ET.