JPMorgan index inclusion to spur $40 bn in inflows

livemint.com:

emerging market global bond indices marks the end of nearly a decade of negotiations between the government and the international index provider, with the potential to draw inflows of more than $40 billion into Indian bonds over the next 18 months. On Thursday, JPMorgan Chase announced that 23 Indian government bonds, with a combined nominal value of $330 billion, have been found eligible to be added to the Global Bond Index Emerging Markets Index (GBI-EM). The bonds will be included in the indices over 10 months, starting 28 June 2024, with 1% weight being added per month, and is expected to reach the maximum weight of 10% by 31 March 2025.

Economists and brokerages estimate this move will drive inflows worth as much as $40 billion over the next 18-21 months. Goldman Sachs expects India’s inclusion to attract over $40 billion in bond market inflows within 18 months, with $30 billion from passive and $10 billion from active flows. Both bond and currency markets cheered this much-anticipated decision.

The yield on the benchmark 10-year government bond opened 8 basis points lower at 7.09% before closing at 7.18%. The rupee also appreciated against the US dollar on Friday. India’s chief economic adviser V.

Anantha Nageswaran, pointed out that JPMorgan “made this decision on their own". The inclusion to the indices comes despite the government resisting changing the tax treatment for gains made by foreign investors from the sale of Indian government bonds, a major bone of contention between India and the index providers. In its statement, JPMorgan said that the inclusion in GBI-EM follows the Indian government’s introduction of bonds that can be fully owned by foreigners in 2020, as well as steps to aid foreign portfolio