BONDS: Goldman: A High Bar For Global Aggregate Index Eligibility

Goldman Sachs note that “Bloomberg indices are in the midst of their Index Advisory Council review process and one of the items on the agenda is to gauge investor appetite for India's potential eligibility.”

• “Although India will be included in the JPM GBI-EM Global Diversified Index from June 28 ‘24, we think it could be at least 1-2 years before India is included in the Bloomberg Global Aggregate index. The JPM GBI-EM is an emerging market index while the Global Aggregate is more of a DM sovereign / credit index and therefore its investor base will likely expect smoother market access and operations to support India's inclusion.”
• “We note that around 75% of newly issued Indian government bonds are in the Fully Accessible Route (FAR) format, and do not have any restrictions for foreign investors. Therefore, the size of the FAR bonds universe (which are potentially index eligible) is growing rapidly.”
• “Hypothetically, if India were included (not our base case) in the Bloomberg Global Aggregate, we think its index weight would be around 0.7% based on current market values, which could prompt USD15bn worth of additional inflows. This is 1.6x larger than our previous estimate in 2022.”