JP Morgan will add Indian government bonds to its closely-watched emerging market indexes, ending years of speculation and attracting approximately $25 billion of foreign funds into India’s sovereign debt market.
The bank will include 23 Indian government bonds worth $330 billion in its Emerging Markets Government Bond Index from June 2024. According to the Financial Times, India’s “weight” should reach one-tenth of the GBI-EM Global Diversified Index.
Furthermore, international investors in emerging markets have been eager for India to fill the gap left by China’s slowing growth and Russia’s exclusion from the international bond market.
Passive income could reach $25 billion to $26 billion, according to Madhavi Arora, chief economist at Mumbai-based financial group Emkai Global, based on the size of funds that JP Morgan says track relevant indices.
India’s inclusion process is set to begin on June 28, 2024, and will last for 10 months. This development will provide a significant pool of passive foreign financing for India. This could reduce the country’s financing costs in the medium term, making it more attractive to investors.
Record Weekly Sales of European Government Bonds
European governments raised funds at the fastest pace in three years this week, taking advantage of stable market conditions ahead of the usual summer lull in borrowing and another increase in interest rates.
Debt sales through banks reached nearly 27 billion euros ($29 billion). Spain accounted for almost half, using demand of more than 85 billion euros to sell its 13 billion euros worth of 10-year bonds. The European Union is in second place with the sale of a double tranche of seven billion euros on Tuesday, according to Bloomberg.
By selling now, government debt authorities can avoid the negative impact of even higher interest rates. At the same time, the European Central Bank should increase borrowing costs by at least half a percentage point to curb inflation.