Likely entry into Bloomberg index fuels bond volatility
bond index has imparted volatility to the domestic debt market, causing the 10-year benchmark yield to swing close to a tenth of a percentage point.
Market sources told ET that at the conclusion of a recent meeting with the advisers to the Bloomberg index, some investors had raised concerns over lack of necessary systems in place to facilitate trade in Indian government bonds.
Bloomberg Index Services has not yet made an official announcement.
Late September, JP Morgan became the first major global index to include Indian government securities, paving the way for up to $24-25 billion of inflows over the next couple of years.
«After the move by JP Morgan, there was increased activity surrounding the Bloomberg index too. Some large investors were in favour but there are many others who have cited lack of operational preparedness for trading Indian government bonds,» a source said on the condition of anonymity.
Starting November 16 — which some market players said was the day of the last Bloomberg index committee meeting — yield on the 10-year benchmark government bond has swung sharply.
Yield on the benchmark security, which determines pricing for a host of credit products, fell to a low of 7.20% on November 16 and then went on to jump as much as seven basis points to 7.27% on Wednesday.
Bond prices and yields move inversely.
While other factors such as a sharp drop in US Treasury yields had also impacted domestic bond yields, some part of the volatility in Indian bonds was driven by the rumours surrounding the Bloomberg bond index.
“The Bloomberg index tracks a larger AUM (assets under management) than JP Morgan and the investor universe is larger. Moreover, India’s weightage in the Bloomberg index would be
