Is it likely to be an embarrassment of riches?

 "Foreign institutional investors (FIIs) have turned net buyers of government debt after six months of selling, anticipating that the central bank will try to soften long term bond yields to support the government's massive borrowing program," wrote Ghosh and Sonavane. "Experts attributed the buying to the Reserve Bank's recent moves to keep long term bond yields from spiking ahead of the coming borrowing calendar, which is likely to increase significantly from the preceding years given the current economic scenario." Since yields are inversely related to prices of bonds, FIIs maybe expecting prices to rise as the Reserve Bank (RBI) pushes yields down by refusing to sell if bids price the bonds below certain price. In a recent auction the RBI accepted bids for only Rs 1.25 billion at yields of 6%. At the same time the rupee is becoming stronger which means FIIs will gain in exchange rate if they sell. "Dollar buying intervention by the RBI in recent months has made the rupee one of the worst-performing Asian currencies in 2020, despite massive dollar inflows into stock markets and for corporate fundraising," wrote Reuters. India's foreign exchange reserves climbed to a record high of $544.038 billion during the week ended 18 September. "Reserves will provide a level of confidence to markets that a country can meet its external obligations, demonstrate the backing of domestic currency by external assets, assist the government in meeting its foreign exchange needs and external debt obligations and maintain a reserve for national disasters or emergencies."  The rupee is rising because of inflows of dollars and the RBI has been buying dollars to try and stop the rupee from appreciating too high and too quickly. However, buying dollars releases a flood of rupees into the market which the RBI has to neutralize by selling bonds in open market operations (OMO). Selling too many bonds lowers their price and raises yields so the RBI resorted to 'operation twist,  buying long-term bonds, which increases their price and brings down yields, while selling short-term bonds. Due to the coronavirus, emerging market economies will incur heavy fiscal load, will see a rise in public debt and interest burden and some will have to repair their banks, wrote Andy Mukherjee. India will suffer all three problems, plus a shambolic goods and services tax (GST) problem, but the bond market loves it. "The market is pleased because it is getting concessions from panicky authorities." Foreigners pouring money into India. Could it be embarrassing?