Mumbai, June 25 -- India's riskiest category of investment-grade corporate bonds is drawing record interest from wealthy investors and alternative funds, as falling benchmark yields push savvier buyers further down the credit spectrum in search of higher returns.

Yield on India's benchmark 10-year government bond has declined 36 basis points over the past three months to 6.27% as of Tuesday - far below the double-digit yields available in lower-rated corporate bonds.

Issuances of corporate bonds rated BBB+, BBB and BBB-, the lowest tier of rating still considered investment-grade before slipping into junk status, have surged sharply in recent quarters. According to Prime Database, 450 such bonds were issued in the fiscal year ending Mar...