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India is expected to see billions of dollars of foreign inflows as its government bonds debuted on JPMorgan Chase’s (NYSE:JPM) emerging market index on Friday.
The inclusion marks the first time that Indian government bonds have been added to a benchmark index. The bonds will start from a 1% weightage in the Government Bond Index-Emerging Markets in June, eventually increasing to a maximum 10% in April 2025.
India has already seen foreign inflows of about $10B into its bond market since the index inclusion was announced in September, Puneet Pal, head of fixed income at PGIM India Mutual Fund, told CNBC.
HSBC previously said the inclusion would likely attract around $20B-$25B from index-tracking fund managers, as the bonds have relatively higher yields and low correlation with global bonds. The benchmark 10-year yield ticked up 1 basis point to 7.01% on Friday, and its 52-week range is 6.95%-7.40%.
Increased foreign inflows will in turn reduce the government’s borrowing costs and ease India’s ability to finance its fiscal deficit.
Indian bonds are also set to be added to the Bloomberg Emerging Market Local Currency Government Index in January, while U.K.’s FTSE Russell is considering their inclusion.