Huge inflows seen in debt market as G-Secs join JP Morgan’s bond index

Government securities (G-Secs) on Friday officially joined JP Morgan’s Government Bond Index-Emerging Market (GBI-EM). The inclusion in the index is expected to lead to $22 billion of inflows into the country.
The inclusion will happen over a 10-month period from June 28 till March 31, 2025. While India will initially have a 1 per cent weight in the index, it will eventually rise to 10 per cent.
JP Morgan said that only bonds issued under the Reserve Bank of India’s (RBI) fully-accessible route (FAR) will be in the index, which means that 27 such bonds will qualify for inclusion.
The highest weight of 0.59 per cent will be on the 7.18 per cent government bond maturing in 2033. Released by the RBI in 2020, the FAR list covers bonds with no limits on foreign holdings.
Inflows into FAR bonds have reached $11 billion since JP Morgan had announced their entry in September 2023, nearly six times the inflows received from early 2021 to August 2023.
While yields on the benchmark 10-year security ended almost unchanged at 7.00 per cent on Friday, a Reuters’ report said that foreign investors had purchased $480 million of bonds coinciding with the inclusion.
According to a note from Mirae Asset Mutual Fund, foreign portfolio investors (FPIs) hold around 2.4 per cent of the outstanding Indian government bonds.
JP Morgan analysts pointed out that India was the 25th market to enter the GBI-EM index since its launch in June 2005. Indian government bonds will also have the single-highest duration across the index on an average at 7.03 years, with an above average yield-to-maturity at 7.09 per cent.

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