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6th March 2024 (12 Topics)

Bloomberg to add Indian bonds to EM indexes

Context

Bloomberg announced including Indian government securities called “Fully Accessible Route (FAR) bonds” in the Bloomberg Emerging Market (EM) Local Currency Government Index and related indices, to be phased in over a ten-month period, starting January 31, 2025. 

1: Dimension- Impact of index inclusion

  • The weighting of FAR bonds will be increased in increments of 10 per cent of their full market value every month over the 10-month period ending in October 2025, when they will be weighted at their full market value in the indices.
  • Within the market cap weighted version of the index, India is expected to be the largest country after China and South Korea.
  • The inclusion could attract billions of dollars of foreign investment in the Indian government securities (G-Sec) market.
  • Bloomberg Indices will create an ex-India version of the EM Local Currency Government Index and other standard and custom versions of the index.
  • This is an important marker in the development of India’s financial markets and a reflection of India’s growing importance to the global economy.

2: Dimension- Scope for inclusion

  • Indices in scope for inclusion include the:
    • Bloomberg EM Local Currency Government Index
    • Bloomberg EM Local Currency Government Index
    • 10 per cent Country Capped Index
    • all related sub-indices
  • India will continue to be excluded from the Bloomberg Global Aggregate and related indices.
  • FAR is a separate channel introduced by the RBI, in consultation with the Government, for non-resident investment in G-Secs with effect from April 1, 2020.
  • The eligible investors can invest in specified Government securities without any investment ceilings.

This is the second major global index that will be including Indian bonds. JP Morgan had announced index inclusion from June 2024.

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