MUMBAI: The Reserve Bank of India’s holdings of US Treasury bonds touched an all-time high amid growing Modi-Trump bonhomie, likely reflecting the central bank’s view that US rate increases may not be quick, but gradual.At $127.3 billion in May, India was the sixth-largest Asian holder of the safest financial instrument, according to data from the US Department of the Treasury. Globally, the country was ranked 12th, after Saudi Arabia , which invested in Treasury bonds worth $134 billion.“RBI may have used its huge pile of forex reserves to buy US Treasuries, the safest bet for any emerging country,” said Soumya Ghosh, chief economist at State Bank of India “Such record high monthly investment also depicts RBI’s assessment on how US Treasuries would move. Our central bank possibly could see limited rise in yields. Such large investment could fructify in handsome gains if yields fall from the current levels.”India’s foreign exchange reserves have risen over the past few months, hitting a record level of about $391 billion last week from about $381 billion in May.The US benchmark yield was as high as 2.63% during March amid Federal Reserve rate increase hopes. The yield now is about 2.30%, almost similar to the level in May.A lower US yield enhances the gap, or spread, between US and India sovereign bonds, billed as a trigger for overseas investors betting big on domestic debt securities.Falling US yields ideally pave the way for a rate cut, which is now perceived to be adding the country’s growth. Whenever the RBI cuts rates, the gap narrows.“It will be interesting to know if RBI continues to hold such a view amid its bi-monthly policy decisions,” said Ghosh.Japan and China (Mainland) are the top two countries, holding $1,111.3 billion and $1,102.2 billion, respectively, in US debt.Rising US Treasury investments have assumed significance with both the countries strengthening diplomatic ties.“Our ties have never been stronger and better,” President Donald Trump said at a joint press conference when Prime Minister Narendra Modi visited the White House in June.The RBI started investing in US Treasury bonds with $38.4 billion in November 2011.